Vortex Company operates a retail store with two departments. Information about t

Question

Vortex Company operates a retail store with two departments. Information about those departments follows.

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.

B

48

Department A Department B   Sales $ 832,000 $ 448,000       Cost of goods sold 410,000 291,200       Direct expenses      Salaries 120,000 84,000          Insurance 19,500 10,800          Utilities 25,000 29,000          Depreciation 17,000 12,500          Maintenance 6,500 5,800     Required 1. 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 answer to nearest whole dollar.) VORTEX COMPANY Departmental Contribution Statements Department A Department B $832,00448,000 291,200 156,800 ost of goods sold ross profit Direct expenses 410,000 422,000 nsurance epreciation aintenance Total direct expenses tmental contributions to overhead Allocated indirect expenses nsurance epreciation Total indirect expenses Operating income (loss)

Explanation / Answer

$16,900

{26000×[832000/(832000+448000)]}

$9100

{26000×[448000/(832000+448000)]}

$5,040

{7,200×[30100/(30100+12900)]}

$2160

{7,200×[12,900/(30100+12900)]}

$10,220

{14,600×[30100/(30100+12900)]}

$4380

{14,600×[12,900/(30100+12900)]}

$26,400

{44,000×[72/(72+48)]}

$17,600

{44,000×[48/(72+48)]}

Department A Department B Sales $832,000 $448,000 Cost of good sold $410,000 $291,200 Gross profit $422,000 $156,800 Direct expenses: Salaries $120,000 $84,000 Insurance $19,500 $10,800 Utilities $25,000 $29,000 Depriciation $17,000 $12,500 Maintenance $6,500 $5,800 Total direct expenses $188,000 $142,100 Departmental contribution to overhead $234,000 $14,700 Allocated indirect expenses: Salaries(on sales basis)

$16,900

{26000×[832000/(832000+448000)]}

$9100

{26000×[448000/(832000+448000)]}

Insurance(on square foot basis)

$5,040

{7,200×[30100/(30100+12900)]}

$2160

{7,200×[12,900/(30100+12900)]}

Depreciation

$10,220

{14,600×[30100/(30100+12900)]}

$4380

{14,600×[12,900/(30100+12900)]}

Office expenses

$26,400

{44,000×[72/(72+48)]}

$17,600

{44,000×[48/(72+48)]}

Total indirect expenses 58,560 $33,240 Operating income (loss) $175,440 (18,540)

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