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, 20Y7, are as follows: Tech Services Department $905,200 Purchasing Department 380,000 Other corporate administrative expenses 553,000 Total expense $1,838,200 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 450 computers 5,300 purchase orders Commercial Division 280 9,900 Total 730 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 $8,120,700 $6,891,400 Cost of goods sold 4,511,500 3,479,800 Operating expenses 1,592,900 1,722,700 Prepare the divisional income statements for the two divisions. Do not round your interim calculations

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 7E: Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments,...

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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, 20Y7, are as follows:

Tech Services Department	$905,200
Purchasing Department	380,000
Other corporate administrative expenses	553,000
Total expense	$1,838,200

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	450	computers	5,300	purchase orders
Commercial Division	280		9,900
Total	730	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	$8,120,700		$6,891,400
Cost of goods sold	4,511,500		3,479,800
Operating expenses	1,592,900		1,722,700

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, 20Y7
	Consumer Division	Commercial Division
Revenues	?	?
Cost of goods sold	?	?
Gross profit	?	?
Operating expenses	?	?
Operating income before support department allocations	?	?
Support department allocations:
Tech service department	?	?
Purchasing department	?	?
Total support department allocations	?	?
Operating income	?	?

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