Chapter 23 Practice Problem

Pink Company operates a store with two departments: Videos and Music. Information about those departments follows:

	Videos	Music
Sales	$370,500	$279,500
Cost of Goods Sold	320,000	175,000
Operating Expenses:
Salaries	35,000	25,000
Maintenance	12,000	10,000
Utilities	5,000	4,500
Insurance	4,200	3,700

The company also incurred the following service department charges:

Advertising	$15,000
Salaries	27,000
Office Expenses	3,200

Service department charges are allocated to the departments as follows: advertising on the basis of sales; salaries on the basis of number of employees; and office expenses on the basis of square footage. Additional information about the departments follows:

Department	Square Footage	Number of Employees
Videos	5,000	3
Music	3,000	2

Directions: Use the above information to prepare a Divisional Income Statement for Pink Company for the year ended December 31, 2019.