Divisional Income Statements with Support Department Allocations 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, 2017, are as follows: Tech Services Department $861,800 Purchasing Department 456,000 Other corporate administrative expenses 567,000 Total expense $1,884,800 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: Tech Services Purchasing Consumer Division 380 computers 5,300 purchase orders Commercial Division 240 9,900 Total 620 computers 15,200 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 $8,081,600 $7,307,600 Cost of goods sold 4,489,800 3,690,000 Consumer Commercial Revenues $8,081,600 $7,307,600 Cost of goods sold 4,489,800 3,690,000 Operating expenses 1,585,200 1,826,700 Prepare the divisional income statements for the two divisions. Do not round your interim calculations. Horton Technology Divisional Income Statements For the Year Ended December 31, 2017 Consumer Division Commercial Division $ $ Operating income before support department allocations Support department allocations: 000 Total support department allocations 00 Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $300 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $249 per unit. Assume that a transfer price of $285 has been established and that 33,900 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? $ b. How much would the Instrument Division's operating income increase? c. How much would the Components Division's operating income increase? $ as long as the supplier division capacity is d. Any transfer price will cause the total income of the company to toward making materials for products that are ultimately sold to the outside
