Question

A). The centralized employee Travel Department of Howard Company has expenses of $247,500. The department has serviced a total of 7,500 travel reservations for the period. The South Division has made 2,175 reservations during the period, and the West Division has made 5,325 reservations.

How much should each division be charged for travel services? Do not round interim calculations.

South Division	$
West Division	$

B).Income from Operations for Profit Center

The centralized computer technology department of Hardy Company has expenses of $320,000. The department has provided a total of 4,000 hours of service for the period. The Retail Division has used 2,750 hours of computer technology service during the period, and the Commercial Division has used 1,250 hours of computer technology service. Additional data for the two divisions is following below:

	Retail Division	Commercial Division
Sales	$2,150,000	$1,200,000
Cost of goods sold	1,300,000	800,000
Selling expenses	150,000	175,000

Determine the divisional income from operations for the Retail Division and the Commercial Division. Do not round interim calculations.

Hardy Company
Divisional Income from Operations
	Retail Division	Commercial Division
	$	$
	$	$
	$	$
Income from operations	$	$

C).Hardy Company has income from operations of $18,711, invested assets of $77,000, and sales of $207,900. Use the DuPont formula to compute the return on investment. If required, round your answers to two decimal places.

a. Profit margin		%
b. Investment turnover
c. Return on investment

Answer 1

A) Each division must be charged for travel services as follows:

South Division: 2175 / 7500 x 247,500 = $71,775

West Division: 5325 / 7500 x 247,500 = $175,725

C)

a. Profit Margin = 18,711 / 207,900 x 100 = 9%

b. Investment Turnover Ratio = 207,900 / 77,000 = 2.7 times

c. Return on investment = 9% x 2.7 = 24.30%