Question

7. Vortex Company operates a retail store with two departments. Information about those departments follows.

	Department A			Department B
Sales	$	819,000		$	441,000
Cost of goods sold		410,000			286,650
Direct expenses:
Salaries		123,000			81,000
Insurance		14,000			10,200
Utilities		24,500			30,000
Depreciation		17,000			14,000
Maintenance		6,300			5,100

Salaries	$29,000
Insurance	6,400
Depreciation	15,200
Office expenses	50,000

Department	Square footage			Number of employees
A		33,600			77
B		14,400			33

Determine the departmental contribution to overhead and the departmental net income for department A and Department B.

	VORTEX COMPANY Departmental Contribution Statements Department A Department B 0 0 Direct expenses Total direct expenses 0 0 Allocated indirect expenses Total indirect expenses 0 0 Operating income (loss) $0 $0

8.

The following information is provided for each division.

Investment Center	Net Income				Average Assets
Cameras and camcorders	$	5,000,000			$	27,200,000
Phones and communications		2,316,000				19,300,000
Computers and accessories		900,000				13,000,000

Assume a target income of 12% of average invested assets.

Compute residual income for each division.

	Target Income Cameras and Camcorders Phones and Communications Computers and Accessories Targeted return % % % Target income Residual Income Cameras and Camcorders Phones and Communications Computers and Accessories Residual income (loss)

Answer 1

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