Question

Jansen Company reports the following for its ski department for the year 2019. All of its costs are direct, except as noted. Sales $ 605,000 Cost of goods sold 425,000 Salaries 112,000 ($15,000 is indirect) Utilities 14,000 ($3,000 is indirect) Depreciation 42,000 ($10,000 is indirect) Office expenses 20,000 (all indirect) 1. Prepare a departmental income statement for 2019. 2.

Answer 1

Answer:

Part 1

JANSEN COMPANY

Departmental Income Statement—Ski Department

Sales                                                       $605,000

Cost of Sales                                         ($425,000)

Gross Profit                                             $180,000

Direct Expenses

Salaries                                                    ($97,000)

Utilities                                                      ($11,000)

Depreciation                                           ($32,000)

Other Expenses                                      ($38,000)

Operating profit                                         $2,000

Part 2

JANSEN COMPANY

Departmental Contribution to Overhead—Ski Department

Sales                                                       $605,000

Cost of Sales                                         ($425,000)

Gross Profit                                             $180,000

Direct Expenses                                    ($140,000)

Contribution                                             $40,000

Less Overheads

Salaries                                                    ($15,000)

Utilities                                                      ($3,000)

Depreciation                                           ($10,000)

Office Expenses                                      (20,000)

Total Overheads                                      $48,000

Contribution to overhead                  $40,000 : $48,000

Part 3

No.  Jansen should not eliminate the ski department because it is making a profit on it on (Contributing towards the company costs)

Explanation:

Hie, I have attached the full question as pdf below

If the department is making a loss on its own, it must be eliminated. Departments must make a contribution towards the costs of the company overall