Chapter 24, Problem 4APSA

Problem 24-4A

Departmental contribution to income

P3

Vortex Company operates a retail Store with two departments. Information about those departments follows.

The company also incurred the following indirect costs.

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.

Required

1. For each department, determine the departmental contribution to overhead and the departmental net income.

2. Should Department B be eliminated? Explain.