Question
Q1. Divisional Income Statements The following data were summarized from the accounting records for South Seas Coast Construction Company for the year ended June 30,
Q1. Divisional Income Statements
The following data were summarized from the accounting records for South Seas Coast Construction Company for the year ended June 30, 20Y8.
| Cost of goods sold: | Service department charges: | |||||
| Commercial Division | $579,960 | Commercial Division | $79,080 | |||
| Residential Division | 280,490 | Residential Division | 48,580 | |||
| Administrative expenses: | Sales: | |||||
| Commercial Division | $105,450 | Commercial Division | $878,720 | |||
| Residential Division | 100,170 | Residential Division | 500,870 |
Prepare divisional income statements for South Seas Coast Construction Company.
| Commercial Division | Residential Division | |
| Administrative expensesCost of goods soldIncome from operations before service department allocationsSalesService department allocations | $- Select - | $- Select - |
| Administrative expensesCost of goods soldGross profitSalesService department allocations | - Select - | - Select - |
| Gross profitGross lossIncome from operationsSalesService department allocations | $- Select - | $- Select - |
| Administrative expensesCost of goods soldGross profitSalesService department allocations | - Select - | - Select - |
| Cost of goods soldGross profitIncome from operations before service department allocationsSalesService department allocations | $- Select - | $- Select - |
| Administrative expensesGross profitLoss from operationsSalesService department allocations | - Select - | - Select - |
| Administrative expensesGross profitIncome from operationsIncome from operations before service department allocationsLoss from operations | $- Select - | $- Select - |
Q2. Service Department Allocations and Cost Drivers
Middler Corporation, a manufacturer of electronics and communications systems, allocates Computing and Communications Services (CCS) service department costs to profit centers. The following table lists service categories and cost drivers used by the CCS department. The table also includes cost and cost drivers for each service for October.
| CCS Service Category | Cost Driver | Budgeted Cost | Budgeted Cost Driver Quantity | ||
| Help desk | Number of calls | $126,140 | 3,400 | ||
| Network center | Number of devices monitored | 627,750 | 9,300 | ||
| Electronic mail | Number of user accounts | 61,500 | 6,150 | ||
| Handheld technology support | Number of handheld devices issued | 139,200 | 8,700 |
One of the profit centers for Middler Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector:
- The sector has 1,000 employees, of whom 40% are office employees.
- Almost all office employees (80%) have a computer on the network.
- 95 percent of the employees with a computer also have an e-mail account.
- The average number of help desk calls for October was 1 calls per individual with a computer.
- There are 290 additional printers, servers, and peripherals on the network beyond the personal computers.
- All the nonoffice employees have been issued a handheld device.
a. Determine the service allocation rate for the four CCS service categories for October. Round your answers to two decimal places.
| CCS Service Category | Service Allocation Rate | |
| Help desk | $fill in the blank 1 | Per callPer device monitoredPer user or e-mail accountPer employeePer device |
| Network center | $fill in the blank 3 | Per callPer device monitoredPer user or e-mail accountPer employeePer device |
| Electronic mail | $fill in the blank 5 | Per callPer device monitoredPer user or e-mail accountPer employeePer device |
| Handheld technology support | $fill in the blank 7 | Per callPer device monitoredPer user or e-mail accountPer employeePer device |
b. Determine the allocations to the COMM sector for the four CCS service categories for October.
| October allocations to the COMM sector: | |
| Help desk allocation | $fill in the blank 9 |
| Network center allocation | $fill in the blank 10 |
| Electronic mail allocation | $fill in the blank 11 |
| Handheld technology support | $fill in the blank 12 |
Q3. Return on Investment
The income from operations and the amount of invested assets in each division of Shiner Industries are as follows:
| Income from Operations | Invested Assets | |||
| Retail Division | $131,400 | $730,000 | ||
| Commercial Division | 114,000 | 570,000 | ||
| Internet Division | 77,000 | 550,000 |
a. Compute the return on investment for each division. Round to the nearest whole number.
| Division | Percent |
| Retail Division | fill in the blank 1% |
| Commercial Division | fill in the blank 2% |
| Internet Division | fill in the blank 3% |
Q4. Residual Income
The income from operations and the amount of invested assets in each division of Shiner Industries are as follows:
| Income from Operations | Invested Assets | |||
| Retail Division | $107,800 | $490,000 | ||
| Commercial Division | 177,600 | 740,000 | ||
| Internet Division | 59,400 | 330,000 |
Assume that management has established an 10% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
| Retail Division | Commercial Division | Internet Division | ||||
| Income from operations | $107,800 | $177,600 | $59,400 | |||
| Minimum amount of income from operations | fill in the blank 1 | fill in the blank 2 | fill in the blank 3 | |||
| Residual income | $fill in the blank 4 | $fill in the blank 5 | $fill in the blank 6 |
Q5. Profit Center Responsibility Reporting
Glades Sporting Goods Co. operates two divisionsthe Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y8, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:
| SalesWinter Sports Division | $35,910,000 |
| SalesSummer Sports Division | 39,672,000 |
| Cost of Goods SoldWinter Sports Division | 21,546,000 |
| Cost of Goods SoldSummer Sports Division | 22,914,000 |
| Sales ExpenseWinter Sports Division | 6,156,000 |
| Sales ExpenseSummer Sports Division | 5,472,000 |
| Administrative ExpenseWinter Sports Division | 3,591,000 |
| Administrative ExpenseSummer Sports Division | 3,522,600 |
| Advertising Expense | 1,018,000 |
| Transportation Expense | 525,600 |
| Accounts Receivable Collection Expense | 196,000 |
| Warehouse Expense | 3,420,000 |
The bases to be used in allocating expenses, together with other essential information, are as follows:
- Advertising expenseincurred at headquarters, allocated to divisions on the basis of usage: Winter Sports Division, $478,000; Summer Sports Division, $540,000.
- Transportation expenseallocated to divisions at an allocation rate of $18 per bill of lading: Winter Sports Division, 13,900 bills of lading; Summer Sports Division, 15,300 bills of lading.
- Accounts receivable collection expenseincurred at headquarters, allocated to divisions at an allocation rate of $7 per invoice: Winter Sports Division, 12,900 sales invoices; Summer Sports Division, 15,100 sales invoices.
- Warehouse expenseallocated to divisions on the basis of floor space used in storing division products: Winter Sports Division, 160,000 square feet; Summer Sports Division, 200,000 square feet.
Question Content Area
Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Do not round your interim calculations.
| Winter Sports Division | Summer Sports Division | |
| Sales | $fill in the blank 5aaac701302e008_1 | $fill in the blank 5aaac701302e008_2 |
| Cost of goods sold | fill in the blank 5aaac701302e008_3 | fill in the blank 5aaac701302e008_4 |
| Gross profit | $fill in the blank 5aaac701302e008_5 | $fill in the blank 5aaac701302e008_6 |
| Divisional selling and administrative expenses: | blank | blank |
| Divisional selling expenses | $fill in the blank 5aaac701302e008_7 | $fill in the blank 5aaac701302e008_8 |
| Divisional administrative expenses | fill in the blank 5aaac701302e008_9 | fill in the blank 5aaac701302e008_10 |
| Total divisional selling and administrative expenses | $fill in the blank 5aaac701302e008_11 | $fill in the blank 5aaac701302e008_12 |
| Income from operations before service department allocations | $fill in the blank 5aaac701302e008_13 | $fill in the blank 5aaac701302e008_14 |
| Less service department cost allocations: | ||
| Advertising expense | $fill in the blank 5aaac701302e008_15 | $fill in the blank 5aaac701302e008_16 |
| Transportation expense | fill in the blank 5aaac701302e008_17 | fill in the blank 5aaac701302e008_18 |
| Accounts receivable collection expense | fill in the blank 5aaac701302e008_19 | fill in the blank 5aaac701302e008_20 |
| Warehouse expense | fill in the blank 5aaac701302e008_21 | fill in the blank 5aaac701302e008_22 |
| Total | $fill in the blank 5aaac701302e008_23 | $fill in the blank 5aaac701302e008_24 |
| Income from operations | $fill in the blank 5aaac701302e008_25 | $fill in the blank 5aaac701302e008_26 |
Question Content Area
Provide supporting schedules for determining service department cost allocations.. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.
| Winter Sports Division | Summer Sports Division | Total | |
| Advertising expense | $fill in the blank 0cf7b3fcd04007e_1 | $fill in the blank 0cf7b3fcd04007e_2 | $fill in the blank 0cf7b3fcd04007e_3 |
| Transportation rate per bill of lading | $fill in the blank 0cf7b3fcd04007e_4 | $fill in the blank 0cf7b3fcd04007e_5 | |
| Number of bills of lading | fill in the blank 0cf7b3fcd04007e_6 | fill in the blank 0cf7b3fcd04007e_7 | |
| Transportation expense | $fill in the blank 0cf7b3fcd04007e_8 | $fill in the blank 0cf7b3fcd04007e_9 | $fill in the blank 0cf7b3fcd04007e_10 |
| Accounts receivable collection rate | $fill in the blank 0cf7b3fcd04007e_11 | $fill in the blank 0cf7b3fcd04007e_12 | |
| Number of sales invoices | fill in the blank 0cf7b3fcd04007e_13 | fill in the blank 0cf7b3fcd04007e_14 | |
| Accounts receivable collection expense | $fill in the blank 0cf7b3fcd04007e_15 | $fill in the blank 0cf7b3fcd04007e_16 | $fill in the blank 0cf7b3fcd04007e_17 |
| Warehouse rate per sq. ft. | $fill in the blank 0cf7b3fcd04007e_18 | $fill in the blank 0cf7b3fcd04007e_19 | |
| Number of square feet | fill in the blank 0cf7b3fcd04007e_20 | fill in the blank 0cf7b3fcd04007e_21 | |
| Warehouse expense | $fill in the blank 0cf7b3fcd04007e_22 | $fill in the blank 0cf7b3fcd04007e_23 | $fill in the blank 0cf7b3fcd04007e_24 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Intermediate Accounting IFRS
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
4th Edition
1119607515, 978-1119607519
