Selected Item Attempt Preview Preview In Window Large Pre Using the data below f

Question

Selected Item Attempt Preview Preview In Window Large Pre Using the data below for the Ace Guitar Company: Sales Cost of goods sold Selling expenses Service department expenses Region Region $556,000 $834,000 211,300 316,900 133,400 200,200 Purchasing $233,500 Payroll accounting 155,700 Allocate service department expenses proportional to the sales of each region. Determine the divisional income from operations for the A and B regian A Region BRegion S s. For interim calculations. round percentages to one decimal place. 155,680 X 233,520 | ?

Explanation / Answer

A Region’s Divisional Income = $ 55,620

B Region’s Divisional Income = $ 83,380

Workings

Percentage proportion of the each division’s sale

A Region = [ $556,000 / 13,90,000 ] x 100 = 40%

B Region = [ $834,000 / 13,90,000 ] x 100 = 60%

Allocation of Service Departments Expenses

Total Expenses = $233,500 + 155,700 = 389,200

Allocation to A Region = $389,200 x 40% = 155,680

Allocation to B Region = $389,200 x 60% = 233,520

Divisional Income = Sales – Cost of goods sold – Selling Expenses – Allocated Service Department Costs

A Region’s Divisional Income = 556,000 – 211,300 – 133,400 – 155,680 = $ 55,620

B Region’s Divisional Income = 834,000 – 316,900 – 200,200 – 233,520 = $ 83,380

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