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

Answer 1

Retail Division $480,000

Commercial Division $30,000

Step-by-step explanation:

To measure divisional income consider only those items attributable to a particular division.

Retail Division

Sales 2,150,000

Less Cost of Sales (1,300,000)

Controllable Contribution 850,000

Less Controllable Fixed Cost :

Selling expenses (150,000)

Allocated Central Cost (2,750/4,000×$320,000) (220,000)

Divisional Profit Contribution 480,000

Commercial Division

Sales 1,200,000

Less Cost of Sales (800,000)

Controllable Contribution 400,000

Less Controllable Fixed Cost :

Selling expenses (150,000)

Allocated Central Cost (1,250/4,000×$320,000) (220,000)

Divisional Profit Contribution 30,000