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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Income from operations for profit center

 Using the data for Croce Company from Practice Exercise 24-2A along with the following data, determine the divisional income from operations for the South and West divisions:

  South Division West Division
Sales $2,600,000 $2,420,000
Cost of goods sold 1,352,000 1,379,400
Selling expenses 520,000 484,000

To determine

Income from operations: Revenue generated mainly from business operations, after the operating expenses are being paid, is referred to as income from operations.

To determine: The income from operations for S Division and W Division

Explanation

Compute divisional income from operations for S Division and W Division.

Company C
Divisional Income Statements
  S Division W Division
Sales $2,600,000 $2,420,000
Cost of goods sold 1,352,000 1,379,400
Gross profit 1,248,000 1,040,600
Selling expenses 520,000 484,000
Income from operations before service department charges 728,000 556,600
Service department charges 412,680 311,320
Income from operations $315,320 $245,280

Table (1)

Working Notes:

Determine the service charges to be charged for travel department of S Division.

Travel service charges = {Number of billed reservations of S Division× Rate per billed reservation}={Number of billed reservations of S Division × 

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