Financial and Managerial Accounting - With CengageNow
14th Edition
ISBN: 9781337577809
Author: WARREN
Publisher: CENGAGE L
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Chapter 23, Problem 23.8EX
(a)
To determine
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Service department charges: These are the indirect expenses incurred by profit center. These are charged for the services received by the department or division, based on the activity base of the service department.
To compare: The performance of P Division and C Division of Incorporation WSA, and explain if the income from operations as performance measure is accurate.
(b)
To determine
To prepare: The income statements for C Division and P Division
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Corrections to Service Department Charges for a Service Company
Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared:
Wild Sun Airlines Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y9
Passenger Division
Cargo Division
Revenues
$3,025,000
$3,025,000
Operating expenses
2,450,000
2,736,000
Income from operations beforeservice department charges
$575,000
$289,000
Less service department charges:
Training
$125,000
$125,000
Flight scheduling
108,000
108,000
Reservations
151,200
384,200
151,200
384,200
Income from operations
$190,800
$(95,200)
The service department charge rate for the service department costs was based on revenues. Because the revenues of the two divisions were the same, the service department charges to each division were also the same.
The following additional…
Corrections to Service Department Charges for a Service Company
Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared:
Wild Sun Airlines Inc.
Divisional Income Statements
For the Year Ended December 31, 20Y9
Passenger Division
Cargo Division
Revenues
$2,314,000
$2,314,000
Operating expenses
1,873,300
2,082,600
Income from operations before
$440,700
$231,400
service department charges
Less service department charges:
Training
$108,800
$108,800
Flight scheduling
80,850
80,850
Reservations
108,000
297,650
108,000
297,650
Income from operations
$143,050
$(66,250)
The service department charge rate for the service department costs was based on revenues. Because the revenues of the two divisions were the same, the service department charges to each division were also the same.
The following additional information is available:
Passenger
Cargo
Total
Division
Division
Number…
Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared:
WILD SUN AIRLINES INC.
Divisional Income Statements
For the Year Ended December 31, 20Y9
1
Passenger Division
Cargo Division
2
Revenues
$3,025,000.00
$3,025,000.00
3
Operating expenses
2,450,000.00
2,736,000.00
4
Income from operations before service department charges
$575,000.00
$289,000.00
5
Less service department charges:
6
Training
$125,000.00
$125,000.00
7
Flight scheduling
108,000.00
108,000.00
8
Reservations
151,200.00
151,200.00
9
Total service department charges
$384,200.00
$384,200.00
10
Income from operations
$190,800.00
$(95,200.00)
The service department charge rate for the service department costs was based on revenues. Because the revenues of the two…
Chapter 23 Solutions
Financial and Managerial Accounting - With CengageNow
Ch. 23 - Prob. 1DQCh. 23 - Differentiate between a profit center and an...Ch. 23 - Weyerhaeuser developed a system that assigns...Ch. 23 - What is the major shortcoming of using income from...Ch. 23 - In a decentralized company in which the divisions...Ch. 23 - How does using the return on investment facilitate...Ch. 23 - Why would a firm use a balanced scorecard in...Ch. 23 - Prob. 8DQCh. 23 - When is the negotiated price approach preferred...Ch. 23 - When using the negotiated price approach to...
Ch. 23 - Budgetary performance for cost center Vinton...Ch. 23 - Service department charges The centralized...Ch. 23 - Income from operations for profit center Using the...Ch. 23 - Profit margin, investment turnover, and ROI Briggs...Ch. 23 - Residual income The Commercial Division of Galena...Ch. 23 - Transfer pricing The materials used by the...Ch. 23 - Budget performance reports for cost centers...Ch. 23 - Divisional income statements The following data...Ch. 23 - Service department charges and activity bases For...Ch. 23 - Service department charges In divisional income...Ch. 23 - Service department charges and activity bases...Ch. 23 - Divisional income statements with service...Ch. 23 - Prob. 23.8EXCh. 23 - Profit center responsibility reporting XSport...Ch. 23 - Return on investment The income from operations...Ch. 23 - Prob. 23.11EXCh. 23 - Determining missing items in return on investment...Ch. 23 - Profit margin, investment turnover, and return on...Ch. 23 - Prob. 23.14EXCh. 23 - Prob. 23.15EXCh. 23 - Determining missing items from computations Data...Ch. 23 - Prob. 23.17EXCh. 23 - Building a balanced scorecard Hit-n-Run Inc. owns...Ch. 23 - Decision on transfer pricing Materials used by the...Ch. 23 - Prob. 23.20EXCh. 23 - Prob. 23.1APRCh. 23 - Profit center responsibility reporting for a...Ch. 23 - Divisional income statements and return on...Ch. 23 - Effect of proposals on divisional performance A...Ch. 23 - Divisional performance analysis and evaluation The...Ch. 23 - Prob. 23.6APRCh. 23 - Budget performance report for a cost center The...Ch. 23 - Profit center responsibility reporting for a...Ch. 23 - Divisional income statements and return on...Ch. 23 - Effect of proposals on divisional performance A...Ch. 23 - Divisional performance analysis and evaluation The...Ch. 23 - Prob. 23.6BPRCh. 23 - Prob. 1ADMCh. 23 - Domino's Pizza: Franchise segment return on...Ch. 23 - Prob. 3ADMCh. 23 - Prob. 23.1TIFCh. 23 - Prob. 23.3TIF
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