Complete the following Divisional Income Statements. If there is no amount or an amount is zero, enter “0”.
Mr. Bailey asks that you prepare Divisional Income Statements showing what 20Y8 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 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 Divisional Income Statements. If there is no amount or an amount is zero, enter “0”.
| BOR CPAs, Inc. Divisional Income Statements For the Year Ended December 31, 20Y8 |
|||
| Audit Division | Tax Division | Total Company | |
| Fees earned: | |||
| Audit fees (16 engagements) | $1,200,000 | $1,200,000 | |
| Tax fees (45 engagements) | $708,750 | 708,750 | |
| Transfer-pricing fees | |||
| Expenses: | |||
| Variable: | |||
| Audit hours provided by Audit Division | (216,000) | (216,000) | |
| Tax hours provided by Tax Division | (283,500) | (283,500) | |
| Excess capacity hours paid to salaried staff | |||
| Audit hours provided by Tax Division | |||
| Fixed expenses | (50,000) | (65,500) | (115,500) |
| Operating income before support department allocations | $ | $ | $ |
| Support department allocations for payroll | |||
| Operating income |
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