Using the data for Kensy Company from Practice Exercise 24-2A along with the data provided below,

Using the data for Kensy Company from Practice Exercise 24-2A along with the data provided below, determine the divisional income from operations for the Northeast and Pacific divisions.

                       Northeast Division | Pacific Division
Sales                           $1,155,000 | $1,204,000
Cost of goods sold          590,800 |    658,000
Selling expenses             231,000 |    252,000

Answer:


Northeast  Pacific 
Division Division 
Sales……………………………………………………… $1,155,000 $1,204,000 
Cost of goods sold……………………………………    590,800   658,000 
Gross profit…………………………………………… $   564,200 $   546,000 
Selling expenses………………………………………    231,000   252,000 
Income from operations before service 
department charges…………………………………  $   333,200 $   294,000 
Service department charges…………………………    195,750   239,250 
Income from operations……………………………… $   137,450 $  54,750 

The centralized employee travel department of Kensy Company has expenses of $435,000

The centralized employee travel department of Kensy Company has expenses of $435,000. The department has serviced a total of 4,000 travel reservations for the period. The Northeast Division has made 1,800 reservations during the period, and the Pacific Division has made 2,200 reservations. How much should each division be charged for travel services?

Answer:

Northeast Division Service Charge for Travel Department: 

$195,750 = 1,800 billed reservations × ($435,000 ÷ 4,000 reservations) 

Pacific Division Service Charge for Travel Department: 

$239,250 = 2,200 billed reservations × ($435,000 ÷ 4,000 reservations)