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Elegant decor company's management is trying to decide

01/05/2021 Client: muhammad11 Deadline: 2 Day

Departmental contribution to income and Analysis of possible elimination of a department
Subject
Business Finance

Question Description
Q 1)

Vortex Company operates a retail store with two departments. Information about those departments Problem 9-4A follows.

Departmental

contribution to income

P3

Department A Department B

Sales . . . . . . . . . . . . . . . . . . . . . $800,000 $450,000

Cost of goods sold . . . . . . . . . 497,000 291,000

Direct expenses

Salaries . . . . . . . . . . . . . . . . . 125,000 88,000

Insurance . . . . . . . . . . . . . . . 20,000 10,000

Utilities . . . . . . . . . . . . . . . . . 24,000 14,000

Depreciation . . . . . . . . . . . . 21,000 12,000

Maintenance . . . . . . . . . . . . . 7,000 5,000

Chapter 9 Performance Measurement and Responsibility Accounting 381

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.

The company also incurred the following indirect costs.

Salaries . . . . . . . . . . . . . . . . $36,000

Insurance . . . . . . . . . . . . . . 6,000

Depreciation . . . . . . . . . . . 15,000

Office expenses . . . . . . . . . 50,000

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