Answer:
Part 1
<u>JANSEN COMPANY</u>
<u>Departmental Income Statement—Ski Department</u>
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
<u>JANSEN COMPANY</u>
<u>Departmental Contribution to Overhead—Ski Department</u>
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:
<em>Hie, I have attached the full question as pdf below</em>
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
The opportunity cost of a decision refers to the benefits that a person misses out on when choosing a particular alternative over another one. Knowing the opportunity cost of your choices is likely to help you make better decisions in an informed way.
In this example, if you were to choose the Maroon 5 concert, the benefit that you would miss out on would be the chance to attend a Taylor Swift concert. This is a real possibility as the tickets are under budget. The consequence would be very significant as you are a huge Taylor Swift fan.
