Question
Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December
Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 2016, are as follows:
Tech Support Department $ 516,000
Purchasing Department 89,600
Other corporate administrative expenses 560,000
Total corporate expense $1,165,600
The other corporate administrative expenses include officers salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows:
Tech Support Purchasing
Consumer Division 375 computers 1,960 purchase orders
Commercial Division 225 3,640
Total 600 computers 5,600 purchase orders
The service department charges of the Tech Support 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 $7,430,000 $6,184,000
Cost of goods sold 4,123,000 3,125,000
Operating expenses 1,465,000 1,546,000
Prepare the divisional income statements for the two divisions. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries.
Labels and Amount Descriptions
Labels
Service department charges
Amount Descriptions
Advertising Department
Cost of goods sold
Gross profit
Income from operations
Income from operations before service department charges
Operating expenses
Purchasing Department
Revenues
Selling expenses
Tech Support Department
Divisional Income Statements
Prepare the divisional income statements.
YOZAMBA TECHNOLOGY
Divisional Income Statements
For the Year Ended December 31, 2016
Consumer Division Commercial Division
1
2
3
4
5
6
7 (Label)
8
9
10 Total service department charges
11 Income from operations
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