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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Moon Company is considering eliminating its Drapery Department. Management does not believe the indirect expenses and the level of operations in the other departments will be affected if the Drapery Department closes. Information from Moon’s income statement for the fiscal year ended December 31, which is considered a typical year, is as follows:

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Moon considers $19,000 of the operating expenses of the Drapery Department to be direct expenses.

Required

Calculate the departmental margin of the Drapery Department.

Check Figure

Gross Profit, $26,000

To determine

Ascertain the departmental margin of Drapery Department for the year ended December 31, 20--.

Explanation

Departmental margin or direct operating margin: The departmental income statement reports the departmental direct operating margin, which is the excess of departmental gross profit over the direct operating expenses incurred.

Formula for departmental direct operating margin:

Departmental direct operating margin} = Departmental gross profit–Direct operating expenses

Ascertain the departmental margin of Drapery Department for the year ended December 31, 20--

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