Does the income from operations for the two divisions accurately measure performance? Correct the divisional income statements, using the activity bases provided above in revising the service department charges. Outdoor Athletic Equipment Co. operates two divisions-the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of June 30, 2008, the end of the current fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales-Winter Sports (WS) Division _$ 950,000 Sales-Summer Sports (SS) Division_1,437,500 Cost of Goods Sold-Winter Sports (WS) Division_512,500 Cost of Goods Sold-Summer Sports (SS) Division_687,500 Sales Expense-Winter Sports (WS) Division_150,000 Sales Expense-Summer Sports (SS) Division_205,000 Administrative Expense-Winter Sports (WS) Division_97,000 Administrative Expense-Summer Sports (SS) Division_128.000 Advertising Expense_64,500 Transportation Expense_100,700 Accounts Receivable Collection Expense_58,100 Warehouse Expense_120,000 The bases to be used in allocating expenses, together with other essential information, are as follows: Advertising expense-incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $28,000; Summer Sports Division, $36,500. Transportation expense-charged back to divisions at a transfer price of $7.60 per bill of lading: Winter Sports Division, 6,000 bills of lading: Summer Sports Division, 7,250 bills of lading. Accounts receivable collection expense- incurred at headquarters, charged back to divisions at a transfer price of $5.60 per invoice: Winter Sports Division, 4,500 sales invoices; Summer Sports Division, 5,875 sales invoices. Warehouse expense-charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 25,000 square feet; Summer Sports Division, 12,500 square feet. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Provide supporting schedules for determining service department charges.Show transcribed image text Does the income from operations for the two divisions accurately measure performance? Correct the divisional income statements, using the activity bases provided above in revising the service department charges. Outdoor Athletic Equipment Co. operates two divisions-the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of June 30, 2008, the end of the current fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales-Winter Sports (WS) Division _$ 950,000 Sales-Summer Sports (SS) Division_1,437,500 Cost of Goods Sold-Winter Sports (WS) Division_512,500 Cost of Goods Sold-Summer Sports (SS) Division_687,500 Sales Expense-Winter Sports (WS) Division_150,000 Sales Expense-Summer Sports (SS) Division_205,000 Administrative Expense-Winter Sports (WS) Division_97,000 Administrative Expense-Summer Sports (SS) Division_128.000 Advertising Expense_64,500 Transportation Expense_100,700 Accounts Receivable Collection Expense_58,100 Warehouse Expense_120,000 The bases to be used in allocating expenses, together with other essential information, are as follows: Advertising expense-incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $28,000; Summer Sports Division, $36,500. Transportation expense-charged back to divisions at a transfer price of $7.60 per bill of lading: Winter Sports Division, 6,000 bills of lading: Summer Sports Division, 7,250 bills of lading. Accounts receivable collection expense- incurred at headquarters, charged back to divisions at a transfer price of $5.60 per invoice: Winter Sports Division, 4,500 sales invoices; Summer Sports Division, 5,875 sales invoices. Warehouse expense-charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 25,000 square feet; Summer Sports Division, 12,500 square feet. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Provide supporting schedules for determining service department charges.
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