Full Throttle Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division

Full Throttle Sporting Goods 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 December 31, 2014, the end of the current fiscal year, after all adjustments, including those for inventories, were recorded and posted:

Sales—Winter Sports Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,500,000
Sales—Summer Sports Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,400,000
Cost of Goods Sold—Winter Sports Division  . . . . . . . . . . . . . . . . . . . . . . . . 18,900,000
Cost of Goods Sold—Summer Sports Division . . . . . . . . . . . . . . . . . . . . . . . 21,112,000
Sales Expense—Winter Sports Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,040,000
Sales Expense—Summer Sports Division  . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,096,000
Administrative Expense—Winter Sports Division . . . . . . . . . . . . . . . . . . . . 3,150,000
Administrative Expense—Summer Sports Division. . . . . . . . . . . . . . . . . . . 3,239,600
Advertising Expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,357,900
Transportation Expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    595,000
Accounts Receivable Collection Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .    240,000
Warehouse Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,650,000

The bases to be used in allocating expenses, together with other essential information, are as follows:

a. Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $611,000; Summer Sports Division, $746,900.

b. Transportation expense—charged back to divisions at a charge rate of $14.00 per bill of lading: Winter Sports Division, 20,400 bills of lading; Summer Sports Division, 22,100 bills of lading.

c. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $7.50 per invoice: Winter Sports Division, 13,120 sales invoices; Summer Sports Division, 18,880 sales invoices.

d. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 124,550 square feet; Summer Sports Division, 140,450 square feet.

Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Provide supporting calculations for service department charges.


Answer:

FULL THROTTLE SPORTING GOODS CO. 
Divisional Income Statements 
For the Year Ended December 31, 2014 
 Winter 
Sports 
Division 
Summer 
Sports 
Division 
Sales $31,500,000 $36,400,000 
Cost of goods sold 18,900,000 21,112,000 
Gross profit $12,600,000 $15,288,000 
Divisional selling expenses $  5,040,000 $  5,096,000 
Divisional administrative expenses 3,150,000 3,239,600 
 $  8,190,000 $  8,335,600 
Income from operations before service   
department charges $  4,410,000 $  6,952,400 
Less service department charges:   
Advertising expense (Note 1) $ 611,000 $ 746,900 
Transportation expense (Note 2) 285,600 309,400 
Accounts receivable collection expense (Note 3) 98,400 141,600 
Warehouse expense (Note 4) 1,245,500 1,404,500 
Total $  2,240,500 $  2,602,400 
Income from operations $  2,169,500 $  4,350,000 
   
Note (1) Winter Sports Division: $611,000 
 Summer Sports Division: $746,900 
Note (2) Winter Sports Division: 
Summer Sports Division: 
(20,400 bills of lading × $14.00 per bill of lading) 
(22,100 bills of lading × $14.00 per bill of lading) 
Note (3) Winter Sports Division: 
Summer Sports Division: 
(13,120 invoices × $7.50 per invoice) 
(18,880 invoices × $7.50 per invoice) 
Note (4) Winter Sports Division: 
Summer Sports Division: 
($2,650,000/265,000 sq. ft.) × 124,550 sq. ft. 
($2,650,000/265,000 sq. ft.) × 140,450 sq. ft.