Question

Grael 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, 20Y7, are as follows:

Tech Support Department	$ 492,000
Purchasing Department	75,600
Other corporate administrative expenses	575,000
Total corporate expense	$1,142,600

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	340 computers	1,930 purchase orders
Commercial Division	260	3,470
Total	600 computers	5,400 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	$7,460,000	$6,180,000
Cost of goods sold	4,112,000	3,122,500
Operating expenses	1,462,000	1,549,500

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. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading.

Labels and Amount Descriptions

Labels
For the Year Ended December 31, 20Y7
For the Month Ended December 31, 20Y7
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

Divisional Income Statements

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. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading.

GRAEL TECHNOLOGY

Divisional Income Statements

1		Consumer Division	Commercial Division
2
3
4
5
6
7
8
9
10	Total service department charges
11	Income from operations

Answer 1

Divisional income statement represents income statement prepared by division
The divisional income statement for company is shown below
Grael Technology
Divisional income statement
For the year ended 31st December 20Y7
	Consumer	Commercial
Revenue	$7,460,000	$6,180,000
Cost of goods sold	$4,112,000	$3,122,500
Gross profit	$3,348,000	$3,057,500
Operating expenses	$1,462,000	$1,549,500
Income from operations before service department charges	$1,886,000	$1,508,000
Service department charges
Tech support	$278,800	$213,200
Purchasing	$27,020	$48,580
Total service department charges	$305,820	$261,780
Income from operations	$1,580,180	$1,246,220
Working
Allocation of service department charges
Tech support
Consumer	(492000/600)*340	278800
Commercial	(492000/600)*260	213200
Purchasing
Consumer	(75600/5400)*1930	27020
Commercial	(75600/5400)*3470	48580
Other corporate administrative expenses are common costs not allocated to division