Yozamba Technology has two divisions, Consumer and Commercial, and two corporate
ID: 2450859 • Letter: Y
Question
Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 2016, are as follows:
Tech Support Department
$ 516,000
Purchasing Department
89,600
Other corporate administrative expenses
560,000
Total corporate expense
$1,165,600
The other corporate administrative expenses include officers’ salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows:
Tech Support
Purchasing
Consumer Division
375 computers
1,960 purchase orders
Commercial Division
225
3,640
Total
600 computers
5,600 purchase orders
The service department charges of the Tech Support 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
$7,430,000
$6,184,000
Cost of goods sold
4,123,000
3,125,000
Operating expenses
1,465,000
1,546,000
Prepare the divisional income statements for the two divisions. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries.
Labels
Service department charges
Amount Descriptions
Advertising Department
Cost of goods sold
Gross profit
Income from operations
Income from operations before service department charges
Operating expenses
Purchasing Department
Revenues
Selling expenses
Tech Support Department
repare the divisional income statements.
YOZAMBA TECHNOLOGY
Divisional Income Statements
For the Year Ended December 31, 2016
1
Consumer Division
Commercial Division
2
3
4
5
6
7
(Label)
8
9
10
Total service department charges
11
Income from operations
Tech Support Department
$ 516,000
Purchasing Department
89,600
Other corporate administrative expenses
560,000
Total corporate expense
$1,165,600
Explanation / Answer
Yozamba Technology has two divisions, Consumer and Commercial, and two corporate
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