Question

Marian Corporation has two separate divisions that operate as profit centers.Black Division Navy DivisionSales (net) $700,000 $320,000Salary expense 20,000 40,000Cost of goods sold 170,000 151,000The following information is available for the most recent year: The Black Division occupies 28,000 square feet in the plant. The Navy Division occupies 42,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $70,000. Compute departmental income for the Black and Navy Divisions, respectively. (Do not round your intermediate computations)a. $150,000; $129,000. b. $530,000; $169,000. c. $482,000; $87,000. d. $150,000; $107,000. e. $680,000; $280,000.

Answer 1

Answer:

The correct option is c. $482,000; $87,000

Explanation:

For computing the departmental income, the following formula is shown below:

= Sales - cost of good sold - salary expense - rent expense

For Black division,

The department income would be

=  Sales - cost of good sold - salary expense - rent expense

where,

rent expense = black division × (total rent expense ÷ sum of total square feet)

where,

sum of total square feet = black division square feet + navy division square feet

= 28,000 + 42,000

= 70,000 square feet

So, the rent expense for black division would be equal to

= 28,000 × (70,000 ÷ 70,000)

= 28,000

So, the departmental income for black division equal to

= $700,000 - 170,000 - 20,000 - 28,000

= $482,000

For Navy division,

The department income would be

=  Sales - cost of good sold - salary expense - rent expense

where,

rent expense = navy division × (total rent expense ÷ sum of total square feet)

where,

sum of total square feet = navy division square feet + navy division square feet

= 28,000 + 42,000

= 70,000 square feet

So, the rent expense for black division would be equal to

= 42,000 × (70,000 ÷ 70,000)

= 42,000

So, the departmental income for black division equal to

= $320,000 - 151,000 - 40,000 - 42,000

= $87,000

Hence, the departmental income for the Black and Navy Divisions is $482,000 and $87,000 respectively.

Therefore, the correct option is c. $482,000; $87,000