Question

The sales, gross profit, and direct and indirect operating expenses of Departments A and B of...

The sales, gross profit, and direct and indirect operating expenses of Departments A and B of Cardoba Inc. are as follows:

Dept. A

Dept. B

Total
Sales

$420,000

$290,000

$710,000
Gross profit

243,000

197,000

440,000
Direct operating expenses

205,000

118,000

323,000
Indirect operating expenses

160,000

​
Compute the departmental direct operating margin and direct operating margin percentage for each department.

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Answer #1

Answer- Departmental direct operating margin- Dept. A = Gross profit- Direct operating expenses

= $243000-$205000

= $38000

Direct operating margin percentage- Dept. A = (Direct operating margin/Sales)*100

= ($38000/$420000)*100

= 9.05%

Departmental direct operating margin- Dept. B = Gross profit- Direct operating expenses

= $197000-$118000

= $79000

Direct operating margin percentage- Dept. A = (Direct operating margin/Sales)*100

= ($79000/$290000)*100

= 27.24%

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