Chapter 25 - Departmentalized profit and cost centers. After reading this chapter, you should be able to: Explain profit centers and cost centers, prepare the gross profit section of a departmental income statement, explain and identify direct and indirect choose the basis for allocation of indirect expenses and compute the amounts to be allocated to each department,. | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Departmentalized Profit and Cost Centers Section 1: Profit and Cost Centers and Departmental Accounting Chapter 25 Section Objectives Explain profit centers and cost centers. Prepare the Gross Profit section of a departmental income statement. Explain and identify direct and indirect departmental expenses. Choose the basis for allocation of indirect expenses and compute the amounts to be allocated to each department. Managerial Accounting Provides financial information about business segments, activities, or products. Supplies information on profitability of a specific department or order. Provides data for making decisions. Cost centers do not directly earn revenue. Cost centers often provide services to other business segments: Accounting department Information systems department Purchasing department Cost Centers Profit Centers Accounting data is gathered and analyzed separately for . | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Departmentalized Profit and Cost Centers Section 1: Profit and Cost Centers and Departmental Accounting Chapter 25 Section Objectives Explain profit centers and cost centers. Prepare the Gross Profit section of a departmental income statement. Explain and identify direct and indirect departmental expenses. Choose the basis for allocation of indirect expenses and compute the amounts to be allocated to each department. Managerial Accounting Provides financial information about business segments, activities, or products. Supplies information on profitability of a specific department or order. Provides data for making decisions. Cost centers do not directly earn revenue. Cost centers often provide services to other business segments: Accounting department Information systems department Purchasing department Cost Centers Profit Centers Accounting data is gathered and analyzed separately for each center. Sells products or services to customers outside the business. Can also be a segment of a company that provides a product to another revenue- producing segment. Responsibility Accounting allows management to evaluate the performance of each segment of the business and assign responsibility for its financial segments. Responsibility Accounting Why do businesses track revenue and expenses by segment? QUESTION: Detailed data on individual departments helps managers assess the profitability of products and department operations ANSWER: Departmentalized Operations Departmental accounts are included in the general ledger. Sales and purchases are recorded by department. Merchandise inventories are counted and reported by department. Departmental Income Statement Gross profit by department Direct expenses can be identified directly with a department. Indirect expenses cannot be directly related to an activity in a department. Semidirect expenses cannot be directly .
