Question

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 sold1,300,000 800,000
Selling expenses150,000 175,000
Required:
1. Determine the divisional income from operations for the Retail Division and the Commercial Division. Do not round interim calculations.

Answer 1

Answer:

$480,000 and $125,000

Explanation:

The computation of the divisional income from Retail division and Commercial division is shown below:

                                 Hardy Corporation  

                          Divisional Income from operations  

Particulars Retail Division Commercial Division

Sales        $2,150,000          $1,200,000

Less: Cost of goods sold $1,300,000 $800,000

Gross profit $850,000            $400,000

Less:-Selling expenses $150,000 $175,000

Other expenses      $220,000         $100,000

($320,000 × 2750 hours ÷ 4,000 hours)  (320000 × 1,250 hours ÷ 4000 hours)

Income from operations $480,000 $125,000

We simply deduct the all expenses from the sales so that the divisional income from operations could come