Vortex Company operates a retail store with two departments. Information about t
ID: 2528714 • Letter: V
Question
Vortex Company operates a retail store with two departments. Information about those departments follows. Sales Cost of goods sold Direct expenses Department A Department B $ 453,600 294,840 $806,400 435,000 Salaries Insurance Utilities Depreciation Maintenance 118,000 12,500 23,000 19,000 6,600 83,000 10,900 24,000 12,500 5,600 The company also incurred the following indirect costs Salaries Insurance Depreciation Office expenses $31,000 6,400 15,600 48,000 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 Department Square footage 31,500 13,500 Number of employeesExplanation / Answer
VORTEX COMPANY
Departmental Contribution Statements
Department A Department B
Sales $ 8,06,400 $ 4,53,600
Less : Cost of goods Sold (4,35,000) (2,94,840)
Gross Profit 3,71,400 1,58,760
Direct Expenses
Salaries 1,18,000 83,000
Insurance 12,500 10,900
Utilities 23,000 24,000
Depreciation 19,000 12,500
Maintenance 6,600 5,600
Total direct expenses 1,79,100 1,36,000
Departmental contribution
to Overhead 1,92,300 22,760
Allocated Indirect expenses
Salaries (8,06,400:4,53,600) 19,840 11,160
Insurance (31,500:13,500) 4,480 1,920
Depreciation (31,500:13,500) 10,920 4,680
Office (77:33) 33,600 14,400
Total Indirect Expenses 68,840 32,160
Operating Income (Loss) 1,23,460 (9,400)
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