Question

MC Qu. 122 Marian Corporation has two... Marian Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: Black Division Navy Division Sales (net) $ 400,000 $ 350,000 Salary expense 23,000 43,000 Cost of goods sold 140,000 154,000 The Black Division occupies 22,000 square feet in the plant. The Navy Division occupies 33,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $55,000. Compute departmental income for the Black and Navy Divisions, respectively. (Do not round your intermediate computations)

Answer 1

Answer: Black Division $215,000

Navy Division $120,000

Explanation:

The other expenses are straightforward except for the Rent Expense so I'll tackle that first.

The Black Division occupies 22,000 square feet in the plant. The Navy Division occupies 33,000 square feet. Rent is an indirect expense and is allocated based on square footage.

Total square feet is,

= 22,000 + 33,000

= 55,000 square feet.

Black Division's percentage of the rent will be,

= 22,000/55,000

= 0.4

Navi Division's percentage of the rent will be

= 33,000/55,000

= 0.6

Total rent is $55,000.

Black Division is therefore apportioned,

= 0.4 * $55,000

= $22,000

Navy is apportioned,

= 0.6 * $55,000

= $33,000

Black Division Departmental Income is therefore,

= Sales - Cost of Goods sold - Salary - Rent

= 400,000 - 140,000 - 23,000 - 22,000

= $215,000

Black Division's Departmental Income is $215,000

Navy Division's Departmental Income is,

= Sales - Cost of Goods sold - Salary - Rent

= 350,000 - 154,000 - 43,000 - 33,000

= $120,000

Navy Division's Departmental Income is $120,000