Cost allocation: Cost allocation is a system to distribute the costs to the activities or departments. The allocation is done on the basis of some allocation base. Departmental Contribution to overhead: Departmental Contribution to overheads is the balance of sales after subtracting all the direct expenses. In other words, it is the amount available to bear overheads or indirect costs. The formula to calculate the Departmental Contribution to overheads is as follows: D e p a r t m e n t a l C o n t r i b u t i o n t o o v e r h e a d s = S a l e s − C o s t o f g o o d s s o l d – T o t a l D i r e c t e x p e n s e s Departmental Net income: Departmental Net income is the balance of Departmental Contribution to overheads after subtracting all the indirect expenses or overheads. The formula to calculate Departmental Net income is as follows: D e p a r t m e n t a l N e t i n c o m e = D e p a r t m e n t a l C o n t r i b u t i o n t o o v e r h e a d s – T o t a l I n d i r e c t E x p e n s e s o r o v e r e h a d s Requirement-1: To calculate: The Contribution to overhead and net income for each department

Question

Want to see the full answer?

Answer 1

Question

Chapter 24, Problem 4BPSB

To determine

Introduction:

Cost allocation: Cost allocation is a system to distribute the costs to the activities or departments. The allocation is done on the basis of some allocation base.

Departmental Contribution to overhead: Departmental Contribution to overheads is the balance of sales after subtracting all the direct expenses. In other words, it is the amount available to bear overheads or indirect costs. The formula to calculate the Departmental Contribution to overheads is as follows:

$D e p a r t m e n t a l C o n t r i b u t i o n t o o v e r h e a d s = S a l e s - C o s t o f g o o d s s o l d - T o t a l D i r e c t e x p e n s e s$

Departmental Net income: Departmental Net income is the balance of Departmental Contribution to overheads after subtracting all the indirect expenses or overheads. The formula to calculate Departmental Net income is as follows:

$\begin{array}{l} D e p a r t m e n t a l N e t i n c o m e = \\ D e p a r t m e n t a l C o n t r i b u t i o n t o o v e r h e a d s - T o t a l I n d i r e c t E x p e n s e s o r o v e r e h a d s \end{array}$

Requirement-1:

To calculate: The Contribution to overhead and net income for each department

To determine

Requirement-2:

To determine: if the Guitar department should be eliminated

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Problem No. 3 The business assets of Glea Yares and Eunice Alico appear below: Yares Alico Cash P 10,000 P 25,000 Accounts Receivable 245,000 565,000 Inventories 122,000 260,000 Land 664,000 Building 938,000 Furniture and Fixtures Total 87,000 P1,128,000 36,000 P1,824,000 000,00 000,000 19 000,008 Account Payable Notes Payable P 178,000 200,000 Yare, Capital diw 750,000 P 245,000 345,000 adi to omen Alicol, Capital Total P1,128,000 1,234,000 P1,824,000 On March 5, 2025, Yares and Alico agreed to form a partnership contributing their assets and equities subject to the following adjustments: qining arboj su to nam a. Accounts receivable of P15,000 in Yares' books and P30,000 in Alico's are uncollectible. b. Inventories of P5,500 and P6,500 are worthless in Yares' and Alico's respective books. Required: 1. In the books of Yares, prepare the necessary journal entries: a. To record the adjustments to Yares' assets b. To close the books of Yares of viande no 251qgque oroa snemu ni 2. In the…

Critically evaluate the progress and challenges in achieving a single set of global accounting standards. Discuss the benefits and drawbacks of globalization in accounting, providing relevant examples. Critically assess the role of the Conceptual Framework in financial reporting and its influence on accounting theory and practice. Discuss how the qualitative characteristics outlined in the Conceptual Framework enhance financial reporting and contribute to decision-usefulness. Provide examples to support your analysis. a) Define research methodology in the context of accounting theory and discuss the importance of selecting appropriate research methodology. Evaluate the strengths and limitations of quantitative and qualitative approaches in accounting research. (10 marks) b) Assess the role of modern accounting theories in guiding research in accounting. Discuss how contemporary theories, such as stakeholder theory, legitimacy theory, and behavioral accounting theory, shape…