Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate costs for the year ended December 31, 20Y7, are as follows: Tech Support Department $336,000 Purchasing Department 67,500 Other corporate administrative costs 448,000 Total corporate costs $851,500 The other corporate administrative costs include officers’ salaries and miscellaneous smaller costs required by the corporation. The Tech Support Department allocates the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department allocates 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 300 computers 1,800 purchase orders Commercial Division 180 2,700 Total 480 computers 4,500 purchase orders The service department allocations of the Tech Support Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative costs 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 $5,900,000 $4,950,000 Cost of goods sold 3,304,000 2,475,000 Operating expenses 1,180,000 1,237,500 Prepare the divisional income statements for the two divisions. Round your interim calculations to three decimal places, if required.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 7E: Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments,...

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Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate costs for the year ended December 31, 20Y7, are as follows:

Tech Support Department	$336,000
Purchasing Department	67,500
Other corporate administrative costs	448,000
Total corporate costs	$851,500

The other corporate administrative costs include officers’ salaries and miscellaneous smaller costs required by the corporation. The Tech Support Department allocates the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department allocates 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	300	computers	1,800	purchase orders
Commercial Division	180		2,700
Total	480	computers	4,500	purchase orders

The service department allocations of the Tech Support Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative costs 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	$5,900,000		$4,950,000
Cost of goods sold	3,304,000		2,475,000
Operating expenses	1,180,000		1,237,500

Prepare the divisional income statements for the two divisions. Round your interim calculations to three decimal places, if required.

GRAEL TECHNOLOGYDivisional Income StatementsFor the Year Ended December 31, 20Y7

		Consumer Division		Commercial Division
		$- Select -		$- Select -
		- Select -		- Select -
		$- Select -		$- Select -
		- Select -		- Select -
Income from operations before service department allocations		$fill in the blank 13		$fill in the blank 14
Less service department cost allocations:
	$- Select -		$- Select -
	- Select -	- Select -	- Select -	- Select -
		$- Select -		$- Select -

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