Fundamental Accounting Principles -Hardcover
Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077862275
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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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:

Departmental Contribution to overheads = Sales Cost of goods sold  Total Direct expenses

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:

Departmental Net income = Departmental Contribution to overheads  Total Indirect Expenses or overehads

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

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Chapter 24 Solutions

Fundamental Accounting Principles -Hardcover

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