I am a bit lost on this problem.  There is a solution posted already HOWEVER the solution does not match the check figures my instructor provided.  Check figure for Contribution to Common under Department A is 75,000 per my instructor.  The solution already posted has a very different number.  Departmental Contribution to Common Expenses Certain operating information is shown below for Palmer Department Store:Department A Department BAll OtherDepartmentsSales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $600,000 $900,000 $2,100,000Traceable expenses . . . . . . . . . . . . . . . . . . . . . . . 105,000 165,000 600,000Common expenses. . . . . . . . . . . . . . . . . . . . . . . . 90,000 120,000 300,000Gross profit percentage . . . . . . . . . . . . . . . . . . . . 30% 40% 50%The managers are disappointed with the operating results of department A.They do not believethat competition will permit raising prices; however, they believe that spending $21,000 more for promoting this department’s products will increase the physical volume of products sold by 20%.An alternative is to discontinue department A and use the space to expand department B. It is believed that department B’s physical volume of products sold can thus be increased 37.5%.Special salespersonnel are needed, however, and department B’s traceable expenses would increase by $90,000.Neither alternative would appreciably affect the total common departmental expense. Requireda. Calculate the contribution now being made to common expenses by department A, by department B, and by the combination of other departments. b. Which of the two alternatives should management choose: increase promotional outlays for department A or discontinue department A and expand department B? Support your answer withcalculations.

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Asked Oct 2, 2019
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I am a bit lost on this problem.  There is a solution posted already HOWEVER the solution does not match the check figures my instructor provided.  Check figure for Contribution to Common under Department A is 75,000 per my instructor.  The solution already posted has a very different number. 
 
Departmental Contribution to Common Expenses Certain operating information is shown below for Palmer Department Store:
Department A Department B
All Other
Departments
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $600,000 $900,000 $2,100,000
Traceable expenses . . . . . . . . . . . . . . . . . . . . . . . 105,000 165,000 600,000
Common expenses. . . . . . . . . . . . . . . . . . . . . . . . 90,000 120,000 300,000
Gross profit percentage . . . . . . . . . . . . . . . . . . . . 30% 40% 50%
The managers are disappointed with the operating results of department A.They do not believe
that competition will permit raising prices; however, they believe that spending $21,000 more for promoting this department’s products will increase the physical volume of products sold by 20%.
An alternative is to discontinue department A and use the space to expand department B. It is believed that department B’s physical volume of products sold can thus be increased 37.5%.Special sales
personnel are needed, however, and department B’s traceable expenses would increase by $90,000.
Neither alternative would appreciably affect the total common departmental expense.
 
Required
a. Calculate the contribution now being made to common expenses by department A, by department B, and by the combination of other departments.
 
b. Which of the two alternatives should management choose: increase promotional outlays for department A or discontinue department A and expand department B? Support your answer with
calculations.
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Expert Answer

Step 1
Step 2

The sales need to be mutiplied with gross profit margin to arrive at the gross profits of each department. Then traceble expenses of each department is subtracted to derive the gross contribution. It can be seen that the gross contribution of Dep A is less than the common expenses and hence Dep A can only contribute $75,000 towards common expenses. The Dep B and other departments however earn enough contribution to contribute towads their common expenditure entirely.

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Others Total Dep A Dep B Sales (a) Gross Profit % (b) Gross Profit (a*b) Traceable expenses 600000 900000 2100000 3600000 30% 40% 50% 1590000 360000 1050000 180000 105,000 165,000600,000 75,000 195,000 450,000 720,000 90,000 120,000 75,000 120,000 -15,000 870000 Contribution Common expenses 300000 510000 Contribution towards common expenses 300000 Loss of Dept A to be borne by company

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Step 3

The evaluation of two propo...

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Increment in promotional expenses |20% of 600000 Expansion of Dept B & discontinue Dept A |37.5% of 900000 Increase in sales volume Increase in sales of the dept A Gross profit margin Gross profit increase Less. Additional expenses less.Contribution of Dept A Increase in contribution 120000 337500 40% 135000 -90,000 -75,000 30% 36000 -21000 15000 -30000

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