Profit Center Responsibility Reporting XSport Sporting Goods Co, operates two di

Question

Profit Center Responsibility Reporting XSport Sporting Goods Co, operates two divisions-the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales-Winter Sports Division Sales-Summer Sports Division Cost of Goods Sold-Winter Sports Division Cost of Goods Sold-Summer Sports Division Sales Expense-Winter Sports Division Sales Expense-Summer Sports Division Administrative Expense-Winter Sports Division Administrative Expense-Summer Sports Division Advertising Expense Transportation Expense Accounts Receivabie Collection Expense Warehouse Expense The bases to be used in allocating expenses, together with other essential information, are as follows: a. Advertising expense-incurred at headquarters, charged back to divisions on the basis of usage: Winter $36,907,s00 40,774,000 22,144,500 23,550,500 6,327,000 5,624,000 3,690,800 3,620,500 976,000 396, 500 205,100 3,515,000 Sports Division, $458,000; Summer Sports Division, $518,000. Division, 14,500 bils of lading: Summer Sports Division, 16,000 bills of lading. rate of $7 per invoice: Winter Sports Division, 13,500 sales invoices; Summer Sports Division, 15,800 b. Transportation expense-charged back to divisions at a charge rate of $13 per bil of lading: Winter Sports c. Accounts receivable collection expense-incurred at headquarters, charged back to divisions at a charge sales invoices d. Warehouse expense-charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 170,000 square feet; Summer Sports Division, 210,000 square feet. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Do not round your interim caiculations. XSport Sporting Goods Co. Divisional Income Statements For the Year Ended December 31, 20Y9 Winter Sports Division Summer Sports Division Sales Cost of goods sold Gross proft Divisional selling and administrative expenses Divisional selling expenses

Explanation / Answer

Xsports Sporting Goods Co. Divisional Income Statements For the Year Ended December 31, 20Y9 Winter Sports Division Summer Sports Division Sales 36907500 40774000 Cost of goods sold 22144500 23550500 Gross profit 14763000 17223500 Divisional selling and administrative expenses Divisional selling expenses 6327000 5624000 Divisonal administrative expenses 3690800 3620500 Total divisional selling and administrative expenses 10017800 9244500 Income from operation before service department charges 4745200 7979000 Service Department charges Advertising expense 458000 518000 Transportation expense 188500 208000 Accounts Receivable collection expense 94500 110600 Warehouse expense 1572500 1942500 Total Service Department charges 2313500 2779100 Income from Operations 2431700 5199900 Xsports Sporting Goods Co. Service Department Charges For the Year Ended December 31, 20Y9 Winter Sports Division Summer Sports Division Total Advertising expense 458000 518000 976000 Transportation rate per bill of lading 13 13 13 Number of bill of lading 14500 16000 30500 Transportation expense 188500 208000 396500 Accounts receivable collection rate 7 7 7 Number of sales invoices 13500 15800 29300 Accounts receivable collection expense 94500 110600 205100 Warehouse rate per Sq. Ft. 9.25 9.25 9.25 Number of Square feet 170000 210000 380000 Warehouse expense 1572500 1942500 3515000

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