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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 Hardy Company from Practice Exercise 24-2B along with the following data, determine the divisional income from operations for the Retail Division and the Commercial Division:

  Retail Division Commercial Division
Sales $2,150,000 $1,200,000
Cost of goods sold 1,300,000 800,000
Selling expenses 150,000 175,000

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 R Division and C Division

Explanation

Compute divisional income from operations for R Division and C Division.

Company H
Divisional Income Statements
  R Division C Division
Sales $2,150,000 $1,200,000
Cost of goods sold 1,300,000 800,000
Gross profit 850,000 400,000
Selling expenses 150,000 75,000
Income from operations before service department charges 700,000 225,000
Service department charges 220,000 100,000
Income from operations $480,000 $125,000

Table (1)

Working Notes:

Determine the service charges to be charged for computer technology department of R Division.

Service department charges = {Number of billed hours of R Division× Rate per hour}={Number of billed hours of R Division × 

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