Question

Jansen Company reports the following for its ski department for the year 2019. All of its costs are direct, except as noted.

Answer 1

Answer:

1.

Jansen Company

Departmental Income Statement—Ski Department

For Year Ended 2019

Sales  610,000

Less : Cost of goods sold  435,000

Gross profit  175,000

Less; Expenses  

Salaries  113,000

Utilities  15,600

Depreciation  54,400

Office expenses  29,600 212,600

Operating loss  $37,600

2.

Jansen Company

Departmental Income Statement—Ski Department

For Year Ended 2019

Sales  610,000

Less : Cost of goods sold  435,000

Gross profit  175,000

Less; Direct Expenses  

Salaries  88,000 (113,000 - 25,000)

Utilities  9,900 (15,600 - 5,700)

Depreciation  37,000 (54,400 - 17,400)

Total Direct Expenses 134,900

Contribution to overhead $40,100

They should not eliminate the Ski Department because it would contribute $40,100 to overhead.