Division X reported income from operations of $975,000 and total service department charges of $575,000. Therefore:
A) net income was $400,000
B) the gross profit margin was $400,000
C) income from operations before service department charges was $1,550,000
D) consolidated net income was $400,000

Question

Quizplus · Accepted Answer

Income from operations before service department charges represents the income earned by the division before any charges from other departments within the company are taken into account. Therefore, to determine income from operations before service department charges, we would add the total service department charges ($575,000 in this case) to income from operations ($975,000). This gives us a total income from operations before service department charges of $1,550,000 (Option C). The other options are incorrect based on the information given.

Division X Reported Income from Operations of $975,000 and Total