Vortex Company operates a retail store with two departments. Information about those departments follows. Department department B
Question:
Vortex Company operates a retail store with two departments. Information about those departments follows.
Department department B
Sales$800,000$450,000
Cost of goods sold497,000291,000
Direct expenses
Salaries125,00088,000
Insurance20,00010,000
Utilities24,00014,000
Depreciation21,00012,000
Maintenance7,0005,000
The company also incurred the following indirect costs.
Salaries$36,000
Insurance6,000
Depreciation15,000
Office expenses50,000
Indirect costs are allocated as follows: salaries on the basis of sales; insurance and depreciation on the basis of square footage; and office expenses on the basis of number of employees. Additional information about the departments follows.
DepartmentSquare footage number of employees
A28,00075
B12,00050
Should Department B be eliminated?
Yes | |
No |