24
Departmental
2. Net Sales less Cost of Goods Sold.
4. Direct expenses: Operating expenses directly traced and identified to a specific
5. A portion is directly traced to the department, while a portion is spent to advertise the
company.
7. Disagree. It does list operating expenses for each department.
9. The question in this case is whether Hernando should shift some of the sales from
SOLUTIONS TO CONCEPT CHECKS
1.
Toys
Clothing
Totals
Sales
$26,000
$52,000
$78,000
Rent Allocated
$6,333
$12,667
$19,000
2.
Bakery
Grocery
Totals
Square Feet
1,900 square feet
4,200 square feet
6,100 square feet
Insurance Allocated
$7,475
$16,525
$24,000
3.
Net Sales
$79,000
Cost of Goods Sold
45,000
Gross Profit on Sales
34,000
Operating Expenses
16,150
Income before Taxes
17,850
Income Tax Expense, 30% rate
5,355
Net Income
$12,495
4.
Dept. A
Dept. B
Total
Net Sales
$4,600
$6,300
$10,900
Cost of Goods Sold
2,500
2,400
4,900
Gross Profit on Sales
$2,100
$3,900
$6,000
Operating Expenses:
Delivery Expense
630
870
1,500
Advertising Expense
540
620
1,160
Depreciation Expense
330
380
710
Total Operating Expense
$1,500
$1,870
3,370
Income Before Taxes
600
2,030
2,630
Income Tax Expense
921
Net Income
$1,709
5.
Dept. A
Dept. B
Total
Net Sales
$6,100
$11,000
$ 17,100
Cost of Goods Sold
1,700
6,000
7,700
Gross Profit of Sales
$4,400
$ 5,000
$ 9,400
Direct Departmental Expense:
Sales Salaries
380
570
950
Advertising Expense
725
450
1,175
Total Direct Dept. Expenses
$1,105
$ 1,020
$ 2,125
Contribution to Indirect Expenses
$3,295
$3,980
7,275
Indirect Department Expense
Rent Expense
850
Total Indirect Expense
$ 850
Income before Tax
$6,425
SOLUTIONS TO SET A EXERCISES
24A-1.
Jewelry
Hardware
Automotive
Totals
Sales
$31,000
$48,000
$21,000
$100,000
Rent Assigned
$2,573
$3,984
$1,743
$8,300
24A-2.
Department
Candy
Ice Cream
Pizza
Totals
Square Footage
17,000
8,300
4,600
29,900
Fire Insurance Expense
$68,227
$33,311
$18,462
$120,000
24A-3.
Net Sales
$74,000
Cost of Goods Sold
48,000
Gross Profit on Sales
$26,000
Operating Expense
16,300
Income before Taxes
$9,700
Income Tax Expense
2,910
Net Income
$6,790
24A-4.
DEPT. A
DEPT. B
TOTAL
Net Sales
$270
0
0
0
00
$300
0
0
0
00
$570
0
0
0
00
Cost of Goods Sold
106
0
0
0
00
126
0
0
0
00
232
0
0
0
00
Gross Profit on Sales
$164
0
0
0
00
$174
0
0
0
00
$338
0
0
0
00
Operating Expenses
Advertising Expense
23
3
5
0
00
22
1
5
0
00
45
5
0
0
00
Delivery Expense
24
7
0
0
00
28
5
0
0
00
53
2
0
0
00
Depreciation Expense
21
0
0
0
00
21
5
0
0
00
42
5
0
0
00
Total Operating Expense
$69
0
5
0
00
$72
1
5
0
00
$141
2
0
0
00
Income before Tax
$94
9
5
0
00
$101
8
5
0
00
$196
8
0
0
00
Income Tax Expense
59
0
4
0
00
Net Income
$137
7
6
0
00
EXERCISES (CONTINUED)
24A-5.
DEPT. A
DEPT. B
TOTAL
Net Sales
$57
0
0
0
00
$96
0
0
0
00
$153
0
0
0
00
Cost of Goods Sold
24
0
0
0
00
46
0
0
0
00
70
0
0
0
00
Gross Profit on Sales
$33
0
0
0
00
$50
0
0
0
00
$83
0
0
0
00
Direct Departmental Expenses
Sales Salaries
3
6
0
0
00
5
4
0
0
00
9
0
0
0
00
Advertising Expenses
3
3
0
0
00
8
7
0
0
00
12
0
0
0
00
Total Direct Departmental Expenses
6
9
0
0
00
14
1
0
0
00
21
0
0
0
00
Contribution Margin
$26
1
0
0
00
$35
9
0
0
00
62
0
0
0
00
Indirect Departmental Expenses
Rent Expense
4
5
0
0
00
Advertising Expenses
12
0
0
0
00
Total Indirect Expenses
16
5
0
0
00
Income before Taxes
$45
5
0
0
00
SOLUTIONS TO SET B EXERCISES
24B-1.
Jewelry
Hardware
Automotive
Totals
Sales
$26,000
$49,000
$22,000
$97,000
Rent Assigned
$2,010
$3,789
$1,701
$7,500
24B-2.
Department
Candy
Ice Cream
Pizza
Totals
Square Footage
14,000
7,900
5,000
26,900
Fire Insurance Expense
$46,840
$26,431
$16,729
$90,000
24B-3.
24B-4.
EXERCISES (CONTINUED)
24B-5.
DEPT. A
DEPT. B
TOTAL
Net Sales
$57
0
0
0
00
$93
0
0
0
00
$150
0
0
0
00
Cost of Goods Sold
25
0
0
0
00
38
0
0
0
00
63
0
0
0
00
Gross Profit on Sales
$32
0
0
0
00
$55
0
0
0
00
$87
0
0
0
00
Direct Departmental Expenses
Sales Salaries
3
6
1
0
00
5
8
9
0
00
9
5
0
0
00
Advertising Expenses
3
0
0
0
00
9
6
0
0
00
12
6
0
0
00
Total Direct Departmental Expenses
6
6
1
0
00
15
4
9
0
00
22
1
0
0
00
Contribution Margin
$25
3
9
0
00
$39
5
1
0
00
64
9
0
0
00
Indirect Departmental Expenses
Rent Expense
5
5
0
0
00
Advertising Expenses
26
4
0
0
00
Total Indirect Expenses
31
9
0
0
00
Income before Taxes
$33
0
0
0
00
SOLUTIONS TO SET A PROBLEMS
PROBLEM 24A-1
QUICK STOP
INCOME STATEMENT SHOWING DEPARTMENTAL GROSS PROFIT
FOR YEAR ENDED DECEMBER 31, 201X
Grocery
Revenue from Sales:
Sales
$17
0
0
0
00
Less: Sales Returns
and Allowances
2
2
0
0
00
Net Sales
$14
8
0
0
00
Cost of Goods Sold:
Merchandise Inventory
January 1, 201X
8
0
0
0
00
Purchases
$21
2
0
0
00
Less: Purchases Returns
and Allowances
6
0
0
00
20
6
0
0
00
Cost of Goods Available
for Sale
$28
6
0
0
00
Less: Merchandise Inventory
December 31, 201X
17
5
0
0
00
Cost of Goods Sold
11
1
0
0
00
Gross Profit on Sales
$3
7
0
0
00
Operating Expenses
Income Before Taxes
Income Tax Expense
Net Income
PROBLEM 24A-1 (CONCLUDED)
QUICK STOP
INCOME STATEMENT SHOWING DEPARTMENTAL GROSS PROFIT
FOR YEAR ENDED DECEMBER 31, 201X
Pizza
Totals
$18
0
0
0
00
$35
0
0
0
00
3
2
0
0
00
5
4
0
0
00
$14
8
0
0
00
$29
6
0
0
00
4
0
0
0
00
12
0
0
0
00
$16
0
0
0
00
$37
2
0
0
00
5
0
0
00
15
5
0
0
00
1
1
0
0
00
36
1
0
0
00
$19
5
0
0
00
$48
1
0
0
00
7
0
0
0
00
24
5
0
0
00
12
5
0
0
00
23
6
0
0
00
$2
3
0
0
00
$6
0
0
0
00
4
6
0
0
00
1
4
0
0
00
3
9
2
00
$1
0
0
8
00