Vortex Company operates a retail store with two departments. Information about t
ID: 2522754 • Letter: V
Question
Vortex Company operates a retail store with two departments. Information about those departments follows Department A Department B Sales Cost of goods sold Direct expenses $800,000 480,000 $450,000 292,500 Salaries Insurance Utilities Depreciation Maintenance 123,000 10,000 24,500 20,500 6,500 86,000 10,000 25,000 13,500 5,300 The company also incurred the following indirect costs Salaries Insurance Depreciation Office expenses $30,000 7,800 15,600 49,000 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 Square footage 30,800 13,200 Number of employees 84 36 Department 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.)Explanation / Answer
Vortex Company
Departmental Contribution Statements
Department A
Department B
Sales
$800,000
$450,000
Cost of goods sold
$480,000
$292,500
Gross margin
$320,000
$157,500
Direct expenses
Salaries
$123,000
$86,000
Insurance
$10,000
$10,000
Utilities
$24,500
$25,000
Depreciation
$20,500
$13,500
Maintenance
$6,500
$5,300
Total Direct expenses
$184,500
$139,800
Departmental Contribution to overhead
$135,500
$17,700
Allocated Indirect expenses
Salaries
$19,200
$10,800
Insurance
$5,460
$2,340
Depreciation
$10,920
$4,680
Office expenses
$34,300
$14,700
Total allocated indirect expenses
$69,880
$32,520
Departmental net income / (Loss)
$65,620
($14820)
Explanation: Allocation of Indirect expenses
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Vortex Company
Departmental Contribution Statements
Department A
Department B
Sales
$800,000
$450,000
Cost of goods sold
$480,000
$292,500
Gross margin
$320,000
$157,500
Direct expenses
Salaries
$123,000
$86,000
Insurance
$10,000
$10,000
Utilities
$24,500
$25,000
Depreciation
$20,500
$13,500
Maintenance
$6,500
$5,300
Total Direct expenses
$184,500
$139,800
Departmental Contribution to overhead
$135,500
$17,700
Allocated Indirect expenses
Salaries
$19,200
$10,800
Insurance
$5,460
$2,340
Depreciation
$10,920
$4,680
Office expenses
$34,300
$14,700
Total allocated indirect expenses
$69,880
$32,520
Departmental net income / (Loss)
$65,620
($14820)
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