Obj. 3 Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments, Tech Services and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows: Tech Services Department $1,170,000 Purchasing Department 450,000 Other corporate administrative expenses Total expense 800,000 $2,420,000 Details The other corporate administrative expenses include officers' salaries and other expenses required by the corporation. The Tech Services Department allocates costs to the divisions based on the number of computers in the department, and the Purchasing Department allocates costs to the divisions based on the number of purchase orders for each department. The services used by the two divisions are as follows: Consumer Division Commercial Division Total Details Tech Services 1,100 computers 700 1,800 computers Purchasing 4,000 purchase orders 8,000 12,000 purchase orders The support department allocations of the Tech Services Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows: Consumer Commercial Revenues $15,500,000 $33,250,000 Cost of goods sold 10,000,000 15,800,000 Operating expenses 3,000,000 1,750,000 Prepare the divisional income statements for the two divisions. HIDE ANSWER Answer: Check Figure: Consumer Division's operating income, $1,635,000 Horton Technology Divisional Income Statements For the Year Ended December 31, 20Y7 Consumer Division $ 15,500,000 (10,000,000) (3,000,000) Commercial Division $ 33,250,000 (15,800,000) (1,750,000) Revenues Cost of goods sold Gross profit Operating expenses Operating income before support department allocations Support department allocations: Tech Services Dept. Purchasing Dept. Total support department allocations li Operating income $ 1,635,000