Vortex company operates a retail store with two departments

I’m studying and need help with a Accounting question to help me learn.

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

Department Square footage Number of employees

A . . . . . . . . . 28,000 75

B . . . . . . . . . 12,000 50

Required

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

income.

2. Should Department B be eliminated? Explain.

Q2) Elegant Decor Company’s management is trying to decide whether to eliminate Department 200, which

has produced losses or low profits for several years. The company’s 2015 departmental income statements