Question

Exercise 22-8 Departmental income statement and contribution to overhead LO P3 Jansen Company reports the following for its ski department for the year 2019. All of its costs are direct, except as noted. Sales Cost of goods sold $615,000 445,000 ($25,400 is indirect) 17,200 ($5,10e is indirect) ($17,900 is indirect) 23,400 (all indirect) Salaries 111,000 Utilities Depreciation 44,400 Office expenses 1. Prepare a departmental income statement for 2019. 2. & 3. Prepare a departmental contribution to overhead report for 2019. Based on these two performance reports, should Jansen eliminate the ski department? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 and 3 Prepare a departmental income statement for 2019. JANSEN COMPANY Departmental Income Statement--Ski Department For Year Ended December 31, 2019 Ski Dept

Answer 1

1. Departmental Income Statement (Amounts in $)

JANSEN Company Departmental Income Statement- Ski Department For the Year ended December 31,2019
	Ski Dept
Sales	615,000
Less: Cost of Goods Sold	445,000
Gross Margin	170,000
Operating Expenses
Depreciation	(44,400)
Salaries	(111,000)
Utilities	(17,200)
Office expenses	(23,400)
Operating Loss	(26,000)

2.Departmental Contribution to Overhead - Ski Department (Amounts in $)

JANSEN Company Departmental Contribution to Overhead - Ski Department For the Year ended December 31,2019
	Ski Dept
Sales	615,000
Cost of Goods Sold	445,000
Gross Profit	170,000
Direct Expenses
Salaries	85,600
Utilities	12,100
Depreciation	26,500
Contribution to Overhead	45,800
Should Jansen Company eliminate the Ski Department?	No

Jansen Company should not eliminate the Ski Department as the Contribution of the company is positive.Even if the company is in losses but still it is able to cover its direct costs. It should only eliminate the Department if the  fixed costs stops recovering.