Question

Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments, Tech Services and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows:

Tech Services Department	$897,600
Purchasing Department	249,000
Other corporate administrative expenses	493,000
Total expense	$1,639,600

The other corporate administrative expenses include officers’ salaries and other expenses required by the corporation. The Tech Services Department allocates costs to the divisions based on the number of computers in the department, and the Purchasing Department allocates costs to the divisions based on the number of purchase orders for each department. The services used by the two divisions are as follows:

	Tech Services		Purchasing
Consumer Division	420	computers	5,800	purchase orders
Commercial Division	260		10,800
Total	680	computers	16,600	purchase orders

The support department allocations of the Tech Services 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	$7,543,100		$5,854,600
Cost of goods sold	4,190,600		2,956,300
Operating expenses	1,479,600		1,463,500

Prepare the divisional income statements for the two divisions. Do not round your interim calculations.

Horton Technology
Divisional Income Statements
For the Year Ended December 31, 20Y7
		Consumer Division		Commercial Division
Revenues		$		$
Cost of goods sold
Gross profit		$		$
Operating expenses
Operating income before support department allocations		$		$
Support department allocations:
Tech service department		$		$
Purchasing department
Total support department allocations		$		$
Operating income		$		$

Answer 1

Prepare the divisional income statements for the two divisions. Do not round your interim calculations.

Horton Technology
Divisional Income Statements
For the Year Ended December 31, 20Y7
		Consumer Division		Commercial Division
Revenues		$7543100		$5854600
Cost of goods sold		4190600		2956300
Gross profit		$3352500		2898300
Operating expenses		1479600		1463500
Operating income before support department allocations		$1872900		1434800
Support department allocations:
Tech service department		$554400		$343200
Purchasing department		87000		162000
Total support department allocations		$641400		$505200
Operating income		$1231500		$929600