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

show the following