Question

In: Accounting

Mach Co. operates three manufacturing departments as profit centers. The following information is available for its...

Mach Co. operates three manufacturing departments as profit centers. The following information is available for its most recent year:

  

Dept. Sales Cost of
goods sold
Direct
expenses
Indirect
expenses
1 $1,100,000 $735,000 $110,000 $85,000
2 430,000 156,500 40,200 105,000
3 710,000 305,000 165,000 21,000

  

Which department has the greatest departmental contribution to overhead and what is the amount contributed?

Group of answer choices

Dept. 3; $430,000

Dept. 1; $255,000

Dept. 2; $110,000

Dept. 3; $240,000

Dept. 2; $156,500

Solutions

Expert Solution

Department
1 2 3
Sales $      1,100,000 $      430,000 $      710,000
COGS             735,000          156,500          305,000
Gross Profit $         365,000 $      273,500 $      405,000
Direct Expenses             110,000            40,200          165,000
Departmental Contribution $         255,000 $      233,300 $      240,000
So greatest contribution is made by department 1 of $255,000, Option 2 is correct.

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