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The centralized computer technology department of Lee Company has expenses of $264,000. The department has provided a total of 2,500 hours of service for the period. The Retail Division has used 1,125 hours of computer technology service during the period, and the Commercial Division has used 1,375 hours of computer technology service. Use the data provided to determine the divisional income from operations for the Division and the Commercial Division. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.
Expert Answer
Income statement of Lee company
| Particulars | Retail Divison ($) | Commercial Division ($) |
| Sales | 945000 | 966000 |
| Cost of goods sold | (504000) | (559300) |
| Selling expenses | (156800) | (175000) |
| Other expenses (W.N.1) | (118800) | (145200) |
| Income | 165400 | 86500 |
W.N.1 : The expenses to be apportioned to Retail Division and Commercial Division are made in the following manner:-
- Total Expenses of Lee Company Computer Technology $ 2,64,000
- Hours used by Retail Division 1,125
- Hours used by Commercial Division 1,375
- Total hours put in by Computer Tech Dept. 2,500 ( 1125 hours + 1375 hours)
Now, the expenses to be apportioned to Retail Division
= 1,125/2,500 * $ 264,000 = $118,800
The Expenses apportion to Commercial Division
= 1,375/2,500 X $ 264,000 = $145,200
