Question
Vortex Company operates a retail store with two departments. Information about those departments follows. Department A Department B Sales $ 832,000 $ 468,000 Cost of
Vortex Company operates a retail store with two departments. Information about those departments follows.
Department A | Department B | |||||
Sales | $ | 832,000 | $ | 468,000 | ||
Cost of goods sold | 485,000 | 304,200 | ||||
Direct expenses: | ||||||
Salaries | 116,000 | 81,000 | ||||
Insurance | 15,500 | 10,300 | ||||
Utilities | 24,500 | 26,000 | ||||
Depreciation | 17,500 | 12,500 | ||||
Maintenance | 6,200 | 5,300 | ||||
The company also incurred the following indirect costs.
Salaries | $28,000 |
Insurance | 7,200 |
Depreciation | 15,000 |
Office expenses | 46,000 |
Indirect costs are allocated as follows: salaries on the basis of sales; insurance and depreciation on the basis of square footage; and office expenses on the basis of number of employees. Additional information about the departments follows.
Department | Square footage | Number of employees | ||||
A | 33,600 | 77 | ||||
B | 14,400 | 33 | ||||
Required: 1. Determine the departmental contribution to overhead and the departmental net income for department A and Department B.
2. Should Department B be eliminated?
Yes or No?
Determine the departmental contribution to overhead and the departmental net income for department A and Department B. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.) VORTEX COMPANY Departmental Contribution Statements Department A Department B 0 0 Direct expenses Total direct expenses 0 0 Allocated indirect expenses 0 0 Total indirect expenses Operating income (loss) $ 0 $ 0Step by Step Solution
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