Mr$.$ Bailey asks that you prepare Divisional Income Statements showing what $20$Y$1$ results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a market transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of $800$ hours, the Audit Division can perform $4$ more audits during the year, and the Tax Division would charge the Audit Division the market rate of $$100\mathrm{.}00$ per hour for the additional hours required, selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their employees.

Complete the following Income Statements. Enter all amounts as positive numbers. If there is no amount or an amount is zero, enter $0.$

Score: $0/64$

BOR CPAs, Inc.

Income Statements

For the Year Ended December $31,20$Y$1$

$1$

Audit Division

Tax Division

Total Company

$2$

Fees earned:

$3$

Audit fees $(16$ engagements$)$

$$1,200,000\mathrm{.}00$

$$1,200,000\mathrm{.}00$

$4$

Tax fees $(45$ engagements$)$

$$708,750\mathrm{.}00$

$708,750\mathrm{.}00$

$5$

Transfer$-$pricing fees

$6$

Expenses:

$7$

Variable:

$8$

Audit hours provided by Audit Division

$216,000\mathrm{.}00$

$216,000\mathrm{.}00$

$9$

Tax hours provided by Tax Division

$283,500\mathrm{.}00$

$283,500\mathrm{.}00$

$10$

Excess capacity hours paid to salaried staff

$11$

Audit hours provided by Tax Division

$12$

Fixed expenses

$50,000\mathrm{.}00$

$65,500\mathrm{.}00$

$115,500\mathrm{.}00$

$13$

Income from operations before service department charges

$$634,000\mathrm{.}00$

$14$

Service department charges for payroll

$15$

Income from operations