Moving to another question will save this response. Question 43 Jorgensen Depart

Question

Moving to another question will save this response. Question 43 Jorgensen Department Store has three departments Clothing. Toys, and Hardware. The most recent income statement showing departmental results is shown below Toys Cost of goods sold Gross profit Direct expenses Allocated expenses Operating income 1000,000600,000 500,000 500,000 200,000 100,000 200,000 400,000 200,000 100,000 75,000 25.000 500,000 360,000 140,000 120,000 175,000 Company Total 2,100.000 ,260.000 840,000 420,000 350,000 70,000 (155.000) (loss) Based on these income statements, management is planning on eliminating the hardware department, as it is generating a net loss Instructions: Answer the following requirements showing as much of your work as is practical where applicable. a-What type of departments (centers or divisions) are Clothing. Toys and Hardware? b-Calculate total operating income for Jorgensen assuming the Hardware C-Calculate the Hardware Department's contribution to overhead d-What is your conclusion regarding the elmination of the Hardware Department? T·-·-· . T TT Arial 3(12pt)

Explanation / Answer

a. These are profit centres.

b.

c.

d. Hard ware department is providing positive contribution to the overall profit of the comapny, it should not be eliminated. The loss in the department is due to allcoated expenses of the company not due to the performance.

Clothing Toys Total Sales        10,00,000        6,00,000        16,00,000 Cost of goods sold           5,00,000        4,00,000           9,00,000 Gross profit           5,00,000        2,00,000           7,00,000 Direct expenses           2,00,000        1,00,000           3,00,000 Allocated expenses           3,50,000 Operating income/(loss)              50,000

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.