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Bonanza has two operating departments (Movies and Video Games) and one service department (Office). Its departmental income statements follow. Indirect expenses and service department expenses consist of rent, utilities, and office department expenses.

Bonanza has two operating departments (Movies and Video Games) and one service department (Office). Its departmental income statements follow. Indirect expenses and service department expenses consist of rent, utilities, and office department expenses.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bonanza has two operating departments (Movies and Video Games) and one service department (Office). Its departmental income statements follow. Indirect expenses and service department expenses consist of rent, utilities, and office department expenses. Departmental Income Statements Video For Year Ended December 31 Movies Games Combined $600,000 420,000 180,000 $200,000 154,000 46,000 $800,000 574,000 226,000 Sales Cost of goods sold Gross profit Expenses Sales salaries Supplies used Depreciation-Equipment 70,500 5,000 7,500 50,000 9,000 49,500 21,000 1,000 4,000 4,500 41,000 7,380 3,000 9,000 1,620 Rent Utilities Share of office department 56,250 18,750 75,000 expenses Total expenses Income (loss) 162,630 $ 17,370 54,370 $ (8,370) 217,000 $ 9,000 Req 1. Prepare a departmental contribution to overhead report (see Exhibit 22.12). 2. Should the video games department be eliminated? Explain.
Transcribed Image Text:Bonanza has two operating departments (Movies and Video Games) and one service department (Office). Its departmental income statements follow. Indirect expenses and service department expenses consist of rent, utilities, and office department expenses. Departmental Income Statements Video For Year Ended December 31 Movies Games Combined $600,000 420,000 180,000 $200,000 154,000 46,000 $800,000 574,000 226,000 Sales Cost of goods sold Gross profit Expenses Sales salaries Supplies used Depreciation-Equipment 70,500 5,000 7,500 50,000 9,000 49,500 21,000 1,000 4,000 4,500 41,000 7,380 3,000 9,000 1,620 Rent Utilities Share of office department 56,250 18,750 75,000 expenses Total expenses Income (loss) 162,630 $ 17,370 54,370 $ (8,370) 217,000 $ 9,000 Req 1. Prepare a departmental contribution to overhead report (see Exhibit 22.12). 2. Should the video games department be eliminated? Explain.
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