Prepare profit reports for software and consulting assuming

Reference no: EM13588901

Icon.com sells software and provides consulting services to companies that conduct business over the Internet. The company is organized into two lines of business (software and consulting), and profit statements are prepared as follows:

	Software	Consulting
Sales	$14,989,000	$8,071,000
Less direct costs	6,180,000	4,410,000
Less allocated costs	5,160,000	1,750,000
Income before taxes	$3,649,000	$1,911,000

Direct costs include costs that are easily associated with each line of business. For software, this includes the salary of programmers, the cost of computers used by programmers, and the cost of software manuals sold to customers. For consulting, direct costs include consultant salaries, computer costs, and travel costs. Allocated costs include costs that are not directly traced to the business units. These costs include employee benefits, rent, telecommunications costs, and general and administrative costs, such as the salary of the CEO of Icon.com.

At the start of 2014, allocated costs were estimated as follows:

Employee benefits		$2,500,000
Rent		1,020,000
Telecommunications		517,000
General and administrative costs		2,873,000
Total		$6,910,000

In the past, allocations have been based on headcount (the number of employees in each business unit). Software had 450 employees and consulting had 150 employees. The new controller of Icon.com believes that the key driver of employee benefits and telecommunications costs is headcount. However, rent is driven by space occupied, and general and administrative costs are driven by relative sales. Icon.com rents 39,000 square feet; approximately 19,500 is occupied by software employees and 19,500 by consulting personnel.

Prepare profit reports for software and consulting assuming the company allocates costs using headcount, space occupied, and sales as allocation bases.

	Software	Consulting
Income before taxesSalesDirect costsAllocated costs	$	$
AddLess:
Allocated costsSalesIncome before taxesDirect costs
Income before taxesSalesDirect costsAllocated costs
Direct costsAllocated costsIncome before taxesSales	$	$

Reference no: EM13588901

Questions Cloud

A depreciation method in which a plant assets depreciation : a depreciation method in which a plant assets depreciation expense for a period is determined by applying a constant

What is the difference between a data flow diagram for the : what is the difference between a data flow diagram for the sales process and a system flowchart describing the sales

What are internal controls why do companies need them what : what are internal controls? why do companies need them? what are some examples of internal controls? who is responsible

A company has total assets of 20000 debt of 7500 and : a company has total assets of 20000 debt of 7500 and equity of 12500. sales are 10000 amp costs are 7000 the dividend

Prepare profit reports for software and consulting assuming : icon.com sells software and provides consulting services to companies that conduct business over the internet. the

As at december 31-2012 a company has total assets of 3500 : q 1 as at december 31-2012 a company has total assets of 3500 current assets of 1500 and fixed assets of 2000 debt of

Given a business scenario that requires the use of : given a business scenario that requires the use of healthcare information technology analyze evaluate and recommend a

What would kutty industriess cost of goods sold had been if : 1.odaine also disclosed that bad debt expense was 1200 in 2012 and 990 in 2011. there were no recoveries of

What are the four symbols used in a data flow diagram and : what are the four symbols used in a data flow diagram and what does each of the symbols mean? and what is the

User Account

All Pages