Using the data below for the Ace Guitar Company: A Region B Region
Sales $767,000 $413,000
Cost of goods sold 291,500 156,900
Selling expenses 184,100 99,100
Service department expenses
Purchasing $198,200
Payroll accounting 132,200
Allocate service department expenses proportional to the sales of each region. Determine the divisional income from operations for the A and B regions. For interim calculations, round percentages to one decimal place.
A Region $
B Region $

A Region $76,640

B Region $41,360

Explanation:

Calculation to Determine the divisional income from operations for the A and B regions.

First step is to find the Percentage of sales allocations:

Using this formula

Percentage of sales allocation= Sales amount/Total sales ×100

Let plug in the formula

A Region = $767,000 ÷($ $767,000+$413,000)×100

A Region=$767,000/$1,180,000 ×100

A Region= 0.65×100

A Region =65%

B Region =$413,000/($767,000+$413,000)×100

B Region=$413,000/$1,180,000 ×100

B Region=0.35×100

B Region=35%

Second step

Service department expenses=

Purchasing $198,200

Add Payroll accounting $132,200

=$330,400

Third step is the allocation of support department expenses for both A and B Region

A Region = 65% × $330,400 = $214,760

B Region=35%×$330,400=$115,640

Last step is to calculate for the Operating income of both region

A Region Operating Income = $767,000-$291,500-$184,100-$214,760

A Region Operating Income = $76,640

B Region Operating Income =$413,000-$156,900-$99,100-$115,640

B Region Operating Income =$41,360

Therefore tlthe divisional income from operations for the A and B regions will be :

A Region $76,640

B Region $41,360

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