Sadar Company operates a store with two departments: videos and music. Information about those departments follows.

The company also incurred the following indirect costs.
Advertising . . . . . . . . . . . $15,000
Salaries . . . . . . . . . . . . . . . 27,000
Office expenses . . . . . . . . . 3,200
Indirect costs are allocated as follows: advertising on the basis of sales; salaries on the basis of number of employees; and office expenses on the basis of square footage. Additional information about the departments follows.

Required
1. For each department, determine the departmental contribution to overhead and the departmental net income.
2. Should the video department be eliminated?Explain.

Transcribed Image Text:

Videos Department Music Department $279,500 175,000 Sales Cost of goods sold Direct expenses $370,500 320,000 Malntenance Utilities .. Insurance ..-^...-.- 35.000 2,000 5,000 4,200 25,000 0,000 4,500 3,700 Department Square footage 5,000 3,000 Number of employees Videos _._.. Music 2