Problem 22-4A Departmental contribution to income LO P3Vortex Company operates a retail store with two departments. Information about those departments follows. Department ADepartment BSales$800,000 $450,000 Cost of goods sold 497,000 291,000 Direct expenses: Salaries 125,000 88,000 Insurance 20,000 10,000 Utilities 24,000 14,000 Depreciation 21,000 12,000 Maintenance 7,000 5,000 The company also incurred the following indirect costs. Salaries$36,000Insurance6,000Depreciation15,000Office expenses50,000 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. DepartmentSquare footageNumber of employeesA 28,000 75 B 12,000 50 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?

Answered: Vortex Company operates a retail store…

Problem 22-4A Departmental contribution to income LO P3

Department Sales Ratio of sales Allocation of salaries i ii iii=ii*36000 A $800000 0.64 $23040…

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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Department

Square footage

Number of employees

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

	Department A	Department B
Sales	$	800,000	$	450,000
Cost of goods sold		497,000		291,000
Direct expenses:
Salaries		125,000		88,000
Insurance		20,000		10,000
Utilities		24,000		14,000
Depreciation		21,000		12,000
Maintenance		7,000		5,000

The company also incurred the following indirect costs.


Salaries	$36,000
Insurance	6,000
Depreciation	15,000
Office expenses	50,000

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.

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?

Expert Solution