Question

Vortex Company operates a retail store with two departments. Information about those departments follows. Department A $845,000 470,000 Department B $455,000 295, 750 Sales Cost of goods sold Direct expenses Salaries Insurance Utilities Depreciation Maintenance 117,000 10,000 22,500 19,500 7,000 87,000 10,500 25,000 14,000 5,300 The company also incurred the following indirect costs. Salaries Insurance Depreciation Office expenses $35,000 8,000 14,200 40,000 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.

Answer 1

Answer-

VORTEX COMPANY
DEPARTMENTAL CONTRIBUTION STATEMENTS
PARTICULARS	DEPARTMENT A	DEPARTMENT B
	$	$
Sales	845000	455000
Less- Cost of goods sold	470000	295750
Gross Profit	375000	159250
Less- Direct Expenses
Salaries	117000	87000
Insurance	10000	10500
Utilities	22500	25000
Depreciation	19500	14000
Maintenance	7000	5300
Total Direct expenses	176000	141800
Departmental contribution to overhead	199000	17450
Less- Allocated indirect expenses
Salaries	(35000*845000)/1300000=22750	(35000*455000)/1300000=12250
Insurance	(8000*28000)/40000=5600	(8000*12000)/40000=2400
Depreciation	(14200*28000)/40000=9940	(14200*12000)/40000=4260
Office	(40000*77)/110 =28000	(40000*33)/110 =12000
Total indirect expenses	66290	30910
Operating Income (loss)	132710	-13460