Question

Jansen Company reports the following for its ski department for the year 2017. All of its costs are direct, except as noted.

Sales	$	600,000
Cost of goods sold		445,000
Salaries		110,000	($25,800 is indirect)
Utilities		16,600	($5,900 is indirect)
Depreciation		51,000	($17,200 is indirect)
Office expenses		28,800	(all indirect)

1. Prepare a departmental income statement for 2017.
2. & 3. Prepare a departmental contribution to overhead report for 2017. Based on these two performance reports, should Jansen eliminate the ski department?

Answer 1

1.

Jansen Company
Ski Department
Departmental Income Statement
For the year 2017
	$	$
Sales		600,000
Cost of Goods Sold		445,000
Gross Profit		155,000
Operating Expenses
Salaries	110,000
Utilities	16,600
Depreciation	51,000
Office Expenses	28,800	206,400
Operating Income ( Loss )		( 51,400)

2 & 3.

Jansen Company
Ski Department
Contribution Margin Income Statement
For the year 2017
	$	$
Sales		600,000
Variable Expenses :
Cost of Goods Sold	445,000
Salaries	84,200
Utilities	10,700
Depreciation	33,800	573,700
Contribution to Overhead		$ 26,300

No, Jansen should not eliminate the Ski Department: