Exercise 22-7 Departmental income statement and contribution to overhead LO P3 J
ID: 2480654 • Letter: E
Question
Exercise 22-7 Departmental income statement and contribution to overhead LO P3 Jansen Company reports the following for its ski department for the year 2015. All of its costs are direct, except as noted. Sales $ 605,000 Cost of goods sold 425,000 Salaries 112,000 ($15,000 is indirect) Utilities 14,000 ($3,000 is indirect) Depreciation 42,000 ($10,000 is indirect) Office expenses 20,000 (all indirect) 1. Prepare a departmental income statement for 2015. 2. Prepare a departmental contribution to overhead report for 2015. 3. Based on these two performance reports, should Jansen eliminate the ski department? Yes No
Explanation / Answer
1
Departmental income statement for 2015
Sales
$ 605,000
Less: Cost of goods sold
$ (425,000)
Less: Salaries
$ (112,000)
Less: Utilities
$ (14,000)
Less: Depreciation
$ (42,000)
Less: Office Expense
$ (20,000)
Net income (loss)
$ (8,000)
2
Departmental contribution to overhead report for 2015:
Sales
$ 605,000
Less: Direct Expenses:
Cost of goods sold
$ (425,000)
Salaries (112000-15000)
$ (97,000)
Utilities (14000-3000)
$ (11,000)
Depreciation (42000-10000)
$ (32,000)
Contribution to overhead=
$ 40,000
3
Jansen should not eliminate the ski department, because the department is earnings positive contribution.
1
Departmental income statement for 2015
Sales
$ 605,000
Less: Cost of goods sold
$ (425,000)
Less: Salaries
$ (112,000)
Less: Utilities
$ (14,000)
Less: Depreciation
$ (42,000)
Less: Office Expense
$ (20,000)
Net income (loss)
$ (8,000)
2
Departmental contribution to overhead report for 2015:
Sales
$ 605,000
Less: Direct Expenses:
Cost of goods sold
$ (425,000)
Salaries (112000-15000)
$ (97,000)
Utilities (14000-3000)
$ (11,000)
Depreciation (42000-10000)
$ (32,000)
Contribution to overhead=
$ 40,000
3
Jansen should not eliminate the ski department, because the department is earnings positive contribution.
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