Star Manufacturing Has Departments a and B with Departmental Income

question 30

Multiple Choice

Star Manufacturing has departments A and B with departmental income statements as follows.
$$\begin{array} { | l | r | r | } \hline & \text { Department A } & \text { Department B } \\\hline \text { Net sales } & \$ 3 5 0 0 0 & \$ 2 5 0 0 0 \\\hline \text { Cost of sales } & 14000 & 11000 \\\hline \text { Other experses } & 6500 & 15500 \\\hline \text { Profit (Loss) } & \$ 14500 & ( \$ 1500 ) \\\hline\end{array}$$
Star Manufacturing is considering eliminating Department B. Of the total 'other expenses' for the two departments of $22 000, $16 000 are fixed general overhead expenses and the rest are variable expenses based on 10% of sales. What is the present departmental contribution of Department B?

• A) ($1 500)
• B) $8 000
• C) $11 500
• D) $14 000

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Definitions:

Salary Allowances

Compensation or benefits on top of regular salary, often for specific purposes like housing, travel, or meals.

Net Income

The amount of money a company earns after deducting all its expenses, taxes, and costs from its total revenue.

Capital Balances

The amount of money that owners have invested in a company plus any retained earnings or minus any losses.

Net Income

Net Income is the profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.