Question

Use the information in the following table to compute each department’s contribution to overhead (both in dollars and as a percent). Which department contributes the largest dollar amount to total overhead? Which contributes the highest percent (as a percent of sales)? Round percents to one decimal.

	Dept. A	Dept. B	Dept. C
Sales	\(53,000	\)180,000	\(84,000
Cost of goods sold	34,185	103,700	49,560
Gross profit	18,815	76,300	34,440
Total direct expenses	3,660	37,060	7,386
Contribution to overheads	\)	\(	\)
Contribution percent of sales	%	%	%

Short answer

	Dept. A	Dept. B	Dept. C
Contribution to overheads	$15,155	$39,240	$27,054
Contribution percent of sales	28.60%	21.80%	32.20%

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of Overheads

The expenses incurred by the business entity that are not related to a particular revenue-generating unit but assist in overall business operations are known as overheads.

Calculation of department’s contribution

	Dept. A	Dept. B	Dept. C
Sales	$53,000	$180,000	$84,000
Cost of goods sold	(34,185)	(103,700)	(49,560)
Gross profit	18,815	76,300	34,440
Total direct expenses	(3,660)	(37,060)	(7,386)
Contribution to overheads	$15,155	$39,240	$27,054
Contribution percent of sales	28.60%	21.80%	32.20%

Working note: Calculation of contribution percent to sales

$\mathrm{Contribution}\mathrm{percent}\mathrm{to}\mathrm{sales}=\frac{\mathrm{Contribution}\mathrm{to}\mathrm{overheads}}{\mathrm{Sales}}\times 100$