Question

Divisional Income Statements The following data were summarized from the accounting records for Ruiz Industries Inc. for the year ended November 30, 20Y8:

Cost of goods sold: Support department allocations:
Commercial Division $447,070 Commercial Division $60,960
Residential Division 227,600 Residential Division 39,420

Administrative expenses: Sales:
Commercial Division $81,290 Commercial Division $677,380
Residential Division 406,430 Residential Division 81,290

Prepare divisional income statements for Ruiz Industries Inc.

Answer 1

Answer:

Commercial division has net income of $88,060  

Residential division has net income of $58,120  

Company wide net income is $146,180

Explanation:

Ruiz Industries divisional income statement  as at 30 November 20Y8

                                              commercial division      residential division

Sales                                          $677,380                      $406,430

costs of goods sold                  ($447,070)                    ($227,600)

Gross profit                                $230,310                       $178,830  

Administrative expenses          ($81,290)                       ($81,290)

operating income                       $149,020                       $97,540  

Allocated costs                           ($60,960)                     ($39,420)

Division net income                    $88,060                        $58,120  

Even though the allocated costs were not incurred directly by the divisions ,but they are still part of the entire business expenses that  must be recovered