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. How much should each division be charged for computer technology department services?

Answer 1

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 $2,150,000 $1,200,000 800,000 175,000 Sales Cost of goods sold 1,300,000 Selling expenses Determine the divisional income from operations for the Retail Division and the Commercial Division. Do not round interim calculations. 150,000 Hardy Company Divisional Income from Operations Commercial Division Retail Division Income from operations

Step-by-step explanation:

Answer 2

Retail Division = $220,000

Commercial Division = $100,000

Step-by-step explanation:

Step 1 : Determine the Overhead application rate

Overhead application rate = Overhead ÷ Total Activity

= $320,000 ÷ 4,000 hours

= $80 per hour

Step 2 : Apply the rate to the respective departments

Applied Overhead = Overhead application rate x Department Activity

therefore,

Retail Division = $80 x 2,750 hours = $220,000

and

Commercial Division = $80 x 1,250 hours = $100,000