Question

Vortex Company operates a retail store with two departments. Information about those departments follows. DepartmentA $806,400 470,000 Department B $453,600 294,840 Sales Cost of goods sold Direct expenses Salaries 122,000 19,500 22,000 19,500 88,000 10,200 25,500 Insurance Utilities Depreciation Maintenance 13,000 5,300 6,600 The company also incurred the following indirect costs. Salaries $35,000 6,600 15,400 43,000 Insurance Depreciation Office expenses 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. Department Square footage 29,400 Number of employees 66 12,600 44 Required: 1. Determine the departmental contribution to overhead and the departmental net income for department A and Department B. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)

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Answer 1

Ans.	VORTEX COMPANY
	Departmental Contribution Statements
		Department   A	Department   B
	Sales	$806,400	$453,600
	Cost of goods sold	$470,000	$294,840
	Gross profit	$336,400	$158,760
	Direct expenses:
	Salaries	$122,000	$88,000
	Depreciation	$19,500	$10,200
	Insurance	$22,000	$25,500
	Utilities	$19,500	$13,000
	Maintenace	$6,600	$5,300
	Total direct expenses	$189,600	$142,000
	Departmental Contributions to overhead	$146,800	$16,760
	Allocated indirect expenses:
	Salaries	$22,400	$12,600
	Insurance	$4,620	$1,980
	Depreciation	$10,780	$4,620
	Office expenses	$25,800	$17,200
	Total indirect expenses	$63,600	$36,400
	Operating income (loss)	$83,200	-$19,640
	*WORKING NOTES:
	*Calculations for Total sales, Total square footage and Total number of employees:
	Departments	Sales	Square footage	Number of employees
	A	$806,400	29400	66
	B	$453,600	12600	44
	TOTAL	$1,260,000	42000	110
	*Calculations for salaries:
	Allocated salaries =   Total salaries * Sales of particular department / Total sales
	A	$35,000 * $806,400 / $1,260,000		$22,400
	B	$35,000 * $453,600 / $1,260,000		$12,600
	*Calculations for insurance:
	Allocated insurance =   Total insurance * Square footage of particular department / Total Square footage
	A	$6,600 * 29,400 / 42,000		$4,620
	B	$6,600 * 12,600 / 42,000		$1,980
	*Calculations for Depreciation:
	Allocated Depreciation =   Total Depreciation * Square footage of particular department / Total Square footage
	A	$15,400 * 29,400 / 42,000		$10,780
	B	$15,400 * 12,600 / 42,000		$4,620
	*Calculations for Office expenses
	Allocated Office expenses =   Total Office expenses * Number of employees of particular department / Total Number of employees
	A	$43,000 * 66 / 110		$25,800
	B	$43,000 * 44 / 110		$17,200