Question

Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Which department has the greatest departmental contribution to overhead (in dollars) and what is the amount contributed? Dept. Sales Cost of Goods Sold Direct Expenses Indirect Expenses 1 $ 1,000,000 $ 700,000 $ 100,000 $ 80,000 2 400,000 150,000 40,000 100,000 3 700,000 300,000 150,000 20,000

Answer 1

Answer:

Department 2 has the highest Contribution To Overhead  and its dollar amount is $ 260,000

Explanation:

Ultimo Co.

                                             Dept. 1                 2                   3

Sales                               $ 1,000,000      $ 400,000          $ 700,000

Cost of Goods Sold            700,000       150,000          300,000

Contribution Margin            300,000       300,000        400,000

Direct Expenses                 100,000              40,000           150,000

Indirect Expenses                 $ 80,000           100,000         20,000

Contribution To Overhead    200,000         260,000       250,000

Contribution To Overhead Calculations

Department 1= Contribution Margin - total direct Expenses

= 300,000-100,000=200,000

Department 2=Contribution Margin - total direct Expenses

=300,000-40,000= 260,000

Department 3=Contribution Margin - total direct Expenses

=400,000-150,000= 250,000