Bonanza has two operating departments (Movies and Video Games) and one service department (Office). Its departmental income statements follow. Indirect expenses and service department expenses consist of rent, utilities, and office department expenses.

Required

1. Prepare a departmental contribution to overhead report (see Exhibit 24.12).
2. Should the video games department be eliminated? Explain.

Exhibit 24.12

Transcribed Image Text:

Departmental Income Statements For Year Ended December 31 Movies Video Games Combined Sales ..... $600,000 $200,000 $800,000 Cost of goods sold . 420,000 154,000 574,000 Gross profit... 180,000 46,000 226,000 Expenses Sales salaries.. Supplies used.... 49,500 21,000 70,500 4,000 1,000 5,000 Depreciation-Equipment. 4,500 3,000 7,500 Rent...... 41,000 9,000 50,000 Utilities ... 7,380 1,620 9,000 Share of office department expenses..... Total expenses . Income (loss)... 56,250 18,750 75,000 162,630 54,370 217,000 $ 17,370 $ (8,370) $ 9,000