Question

Patterson's Department Store prepares monthly income statements by sales departments. These income statements are organized to show contribution margin, performance margin, and responsibility margin for each sales department, as well as operating income for the store as a whole.

All of the following costs are traceable to specific sales departments except:

a.Cost of goods sold.

b. Depreciation of equipment and fixtures used in the department.

c. Advertising a special sale in a particular department.

d. The salary of the store manager.

Answer 1

Ans - Depreciation of equipment and fixtures used in the department (OPTION 'b')

Traceable costs are those that can be applied to a specific segment due to which those costs were incurred , if those segments are removed from the company then traceable costs will also deminish, Non-traceable cost is the opposite that cannot be assigned to a particular segment. In out case, all given costs are traceable except DEPRECIATION because, depreciation of equipment will take place irrespective of whether equipment was used for a specific product or even if it was not used at all. Cost of goods sold, Advertising expenses and salary of store manager responsible for sales can all be traced back to the sales department.

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