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

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Business

Ari Cameron

11 October, 15:22

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

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Answers (1)

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Mathew Armstrong · Answer 1

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