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

Department 3 has the greatest departmental contribution to overhead, contributing $230,000 after accounting for sales, cost of goods sold, direct, and indirect expenses.

Step-by-step explanation:

To determine which department has the greatest departmental contribution to overhead, we need to calculate the departmental contribution for each department by subtracting the cost of goods sold (COGS), direct expenses, and indirect expenses from sales.

• Department 1: $1,000,000 (Sales) - $700,000 (COGS) - $100,000 (Direct Expenses) - $80,000 (Indirect Expenses) = $120,000 (Departmental Contribution)
• Department 2: $400,000 (Sales) - $150,000 (COGS) - $40,000 (Direct Expenses) - $100,000 (Indirect Expenses) = $110,000 (Departmental Contribution)
• Department 3: $700,000 (Sales) - $300,000 (COGS) - $150,000 (Direct Expenses) - $20,000 (Indirect Expenses) = $230,000 (Departmental Contribution)

Department 3 has the greatest departmental contribution to overhead with an amount of $230,000.