Grael Technology has two divisions Consumer and Commercial a

Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows:

The other corporate administrative expenses include officers’ salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows:

The service department charges of the Tech Support Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows:

Prepare the divisional income statements for the two divisions. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading.

Tech Support Department	$ 510,300
Purchasing Department	60,500
Other corporate administrative expenses	580,000
Total corporate expense	$1,150,800

Solution

Grael Technology Divisional Income Statement For the year ended December 31, 20Y7 Consumer division Commercial division Revenues $                        74,30,000 $ 61,87,000 Less: Cost of goods sold $                        41,09,000 $ 31,17,500 Gross Profit $                        33,21,000 $ 30,69,500 Less: Operating expense $                        14,60,000 $ 15,41,500 Income from operations before service department charges $                        18,61,000 $ 15,28,000 Less: Service department charges: Tech support department (Note 1) $ 2,59,200 $ 2,51,100 Purchasing Department (Note 2) $     22,000 $                          2,81,200 $     38,500 $   2,89,600 Income from operations $                        15,79,800 $ 12,38,400 Working Notes: Note 1 Consumer division = ($5,10,300/630) X 320 = $   2,59,200 Commercial division = ($5,10,300/630) X 310 = $   2,51,100 Note 2 Consumer division ($60,500/5,500) X 2,000 = $       22,000 Commercial division ($60,500/5,500) X 3,500 = $       38,500