EXHIBIT 24.12 Departmental Contribution to Overhead combined $239,000 147,800 91,200 A-1 HARDWARE Income Statement Showing Departmental Contribution to Overhead For Year Ended December 31, 2017 Hardware Housewares Appliances Department Department Department Sales $119,500 $71,700 $47,800 Cost of goods sold 73,800 43.800 30.200 Gross profit 45,700 27,900 17,600 Direct expenses Salaries expense 15,600 7.000 7,800 Depreciation expense-Equipment 400 100 200 Supplies expense 200 100 Total direct expenses 16,300 7.300 8.100 Departmental contributions to overhead $ 29,400 $ 20,600 $ 9,500 Indirect expenses Rent expense Utilities expense Advertising expense Insurance expense General office department expense Purchasing department expense Total indirect expenses Operating income 300 30,400 700 600 31,700 $ 59,500 10.800 1,800 1,000 1,900 15,300 9.700 40.500 $ 19,000 Exhibit 24.12 shows a $9,500 positive contribution to overhead for the appliances department. If this department were eliminated, the company would be worse off. Further, the appliance department's manager is better evaluated using this $9,500 than on the department's operating loss of $(500). The company also compares each department's contribution to overhead to budgeted amounts to assess each department's performance. REQUIRED: For this chapter's online journal, I want you to think critically about the concept of "departmental contributions to overhead." Answer the following questions: 1. How is departmental contribution to overhead an effective tool in assessing each department's performance? 2. See Exhibit 24.12 on page 1050 of your textbook. Calculate the departmental contributions margin to overhead for each department. Departmental contribution margin to overhead = departmental contributions to overhead / Sales For example, for the Hardware Department, the departmental contributions margin to overhead would be: $29,400/$119,500 = 24.6% 3. Which department has the highest departmental contributions margin? What does that tell you about the performance of that department relative to the performance of other departments