Question

The Black Division occupies 26,000 square feet in the plant. The Navy Division occupies 39,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $65,000. Compute departmental income for the Black and Navy Divisions, respectively. (Do not round your intermediate computations)

Answer 1

Black Division - $484,000

Navy Division - $90,000

Step-by-step explanation:

Other information required

Black Division Navy Division

Sales (net) $700,000 $320,000

Salary expense $20,000 $40,000

Cost of goods sold $170,000 $151,000

The income is the sales net all expenses. The rental expense will be allocated to each department based on the square footage occupied.

As such, rental expense for

Black Division

= 26000/(26000 + 39000) * $65,000

= $26000

Navy division

= 39000/(26000 + 39000) * $65,000

= $39000

Hence the income for

Black Division

= $700,000 - $20,000 - $170,000 - $26,000

= $484,000

Navy division

= $320,000 - $40,000 - $151,000 - $39,000

= $90,000