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Using the data below for the Ace Guitar Company: A Region B Region Sales $462,000 $858,000...

Using the data below for the Ace Guitar Company:

A Region B Region
Sales $462,000 $858,000
Cost of goods sold 175,600 326,000
Selling expenses 110,900 205,900
Service department expenses
Purchasing $221,800
Payroll accounting 147,800

Allocate service department expenses proportional to the sales of each region, determine the divisional income from operations for the A and B regions. For interim calculations, round percentages to one decimal place.

A Region $
B Region $
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Answer #1

Proportionate Percentage of sales of each region

A Region = [$462,000 / (462,000 + 858,000)] x 100 = 35%

B Region = [$858,000 / (462,000 + 858,000)] x 100 = 65%

Allocation of Service department expenses

A Region = $129,360 [($221,800 + 147,800) x 35%]

B Region = $240240 [($221,800 + 147,800) x 65%]

Divisional Income

A Region = $46,140 [$462,000 – 175,600 – 110,900 – 129,360]

B Region = $85,860 [$858,000 – 326,000 – 205,900 – 240,240]

“Divisional Income, A Region = $46,140”

“Divisional Income, B Region = $85,860”

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