CHAPTER TWENTYSEVEN DEPARTMENTAL ACCOUNTING DEPARTMENTAL ACCOUNTING Provides separate

CHAPTER TWENTY-SEVEN DEPARTMENTAL ACCOUNTING

DEPARTMENTAL ACCOUNTING § Provides separate information about the revenues and expenses of each department § Useful to management for three purposes: o Planning o Control o Performance evaluation § Generally for internal financial statement users o Often only the income statement is prepared

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 Operating expenses: Store clerks wages expense Truck drivers wages expense Sales, Cost of Goods Sold and Gross Profit Advertising expense are reported separately for each department. Store rent expense Bad debt expense Deprec. expense - delivery equip. Other operating expenses Total operating expenses Operating income $ 80, 250 83, 900 79, 500 22, 800 17, 900 24, 000 350, 430 $ 658, 780 $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Total Net sales $1, 075, 000 $640, 300 $1, 715, 300 Cost of goods sold 545, 280 420, 900 966, 180 Gross profit $ 529, 720 $219, 400 $ 749, 120 Gross profit percentages 49. 3% Operating expenses: Store clerks wages expense $ 80, 250 Truck drivers wages expense 83, 900 Gross Profit ÷ Net Sales Advertising expense $529, 720 ÷ $1, 075, 000 79, 500 Store rent expense 22, 800 Bad debt expense 17, 900 Deprec. expense - delivery equip. 24, 000 Other operating expenses 350, 430 Total operating expenses $ 658, 780 Operating income $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Total Net sales $1, 075, 000 $640, 300 $1, 715, 300 Cost of goods sold 545, 280 420, 900 966, 180 Gross profit $ 529, 720 $219, 400 $ 749, 120 Gross profit percentages 49. 3% 34. 3% Operating expenses: Store clerks wages expense $ 80, 250 Truck drivers wages expense 83, 900 Gross Profit ÷ Net Sales Advertising expense 79, 500 $219, 400 ÷ $640, 300 Store rent expense 22, 800 Bad debt expense 17, 900 Deprec. expense - delivery equip. 24, 000 Other operating expenses 350, 430 Total operating expenses $ 658, 780 Operating income $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales $1, 075, 000 $640, 300 Cost of goods sold 545, 280 420, 900 Gross profit $ 529, 720 $219, 400 Gross profit percentages 49. 3% 34. 3% Operating expenses: Store clerks wages expense Truck drivers wages Golf expense is earning a much bigger Advertising expense gross profit percentage than Tennis. Store rent expense Bad debt expense Deprec. expense - delivery equip. Other operating expenses Total operating expenses Operating income Total $1, 715, 300 966, 180 $ 749, 120 $ 80, 250 83, 900 79, 500 22, 800 17, 900 24, 000 350, 430 $ 658, 780 $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Total Net sales $1, 075, 000 $640, 300 $1, 715, 300 Cost of goods sold 545, 280 420, 900 966, 180 Gross profit $ 529, 720 $219, 400 $ 749, 120 Gross profit percentages 49. 3% 34. 3% Operating expenses: Store clerks wages expense $ 80, 250 This does not mean that Golf is Truck drivers wages expense 83, 900 more profitable overall, we must look Advertising expense 79, 500 Store rent expense at the departmental operating expenses. 22, 800 Bad debt expense 17, 900 Deprec. expense - delivery equip. 24, 000 Other operating expenses 350, 430 Total operating expenses $ 658, 780 Operating income $ 90, 340

OPERATING EXPENSES § Two classifications: o Direct • Incurred for the sole benefit of and are traceable directly to a specific department • Assigned to departments based on the actual expenses incurred o Indirect • Incurred for the benefit of the business as a whole and cannot be traced directly to a specific department

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 Operating expenses: Store clerks wages expense $ 80, 250 Truck drivers wages expense 83, 900 Advertising expense 79, 500 Store rent expense 22, 800 Annie’s employs five store clerks. Bad debt expense 17, 900 Two work in the Golf department, Deprec. expense - delivery equip. 24, 000 one in the Tennis department and Other operating expenses 350, 430 two assist customers in Both departments. $ 658, 780 Total operating expenses Operating income $ 90, 340

STORE CLERK WAGES EXPENSE Employee Number Dept. Wages 1 Golf $19, 000 2 Golf 17, 000 3 Tennis 15, 250 4 Both 13, 000 5 Both 16, 000 $80, 250 $29, 000 ($13, 000 + $16, 000) needs to be allocated between Golf and Tennis.

STORE CLERK WAGES EXPENSE Sales Total Sales Golf Tennis $1, 075, 000 $1, 715, 300 $640, 300 $1, 715, 300 62. 7% 37. 3% Allocation is made based on percentage of total sales.

STORE CLERKS WAGES EXPENSE Direct expense Golf Tennis Total $36, 000 $15, 250 $51, 250 Indirect expense allocation: 62. 7% x $29, 000 37. 3% x $29, 000 18, 183 $54, 183 18, 183 10, 817 $26, 067 $80, 250

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Operating expenses: Store clerks wages expense Truck drivers wages expense Advertising expense Store rent expense Bad debt expense Deprec. expense - delivery equip. Other operating expenses Total operating expenses Operating income Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 $54, 183 $26, 067 $ 80, 250 83, 900 79, 500 22, 800 17, 900 24, 000 350, 430 $ 658, 780 $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 Operating expenses: Store clerks wages expense $54, 183 $26, 067 $ 80, 250 Truck drivers wages expense 83, 900 Advertising expense 79, 500 Store rent expense 22, 800 Bad debt expense Annie’s has 3 drivers. 17, 900 Deprec. expense - delivery equip. 24, 000 1 driver delivers only Golf equipment Other operating expenses 350, 430 2 drivers deliver both. Total operating and expenses $ 658, 780 Operating income $ 90, 340

TRUCK DRIVERS WAGES EXPENSE Golf Direct expense $29, 000 Tennis $ 0 Salary of the one driver who delivers only Golf equipment. Total $29, 000

TRUCK DRIVERS WAGES EXPENSE Golf Direct expense $29, 000 Tennis $ 0 Total $29, 000 Indirect expense allocation: 70% x $54, 900 30% x $54, 900 The two other drivers are allocated based on the dollar amount of the Golf and Tennis equipment delivered.

TRUCK DRIVERS WAGES EXPENSE Golf Direct expense $29, 000 Tennis $ 0 Total $29, 000 Indirect expense allocation: 70% x $54, 900 38, 430 $67, 430 38, 430 16, 470 $16, 470 $83, 900

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Operating expenses: Store clerks wages expense Truck drivers wages expense Advertising expense Store rent expense Bad debt expense Deprec. expense - delivery equip. Other operating expenses Total operating expenses Operating income Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 $54, 183 67, 430 $26, 067 $ 16, 470 80, 250 83, 900 79, 500 22, 800 17, 900 24, 000 350, 430 $ 658, 780 $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 Operating expenses: Store clerks wages expense $54, 183 $26, 067 $ 80, 250 Truck drivers wages expense 67, 430 16, 470 83, 900 Advertising expense 79, 500 Store rent expense 22, 800 Bad debt expense 17, 900 Annie’s advertising in both the Deprec. expense - delivery equip. 24, 000 Other operating expensesnewspaper and the radio 350, 430 Total operating expenses $ 658, 780 Operating income $ 90, 340

ADVERTISING EXPENSE GOLF NEWSPAPER $17, 000 TENNIS MIXED $12, 000 $16, 000 RADIO Annie’s newspaper advertising is based on the number of inches of copy space.

ADVERTISING EXPENSE GOLF NEWSPAPER $17, 000 TENNIS MIXED $12, 000 $16, 000 34, 500 RADIO All the radio advertising is considered “mixed. ”

ADVERTISING EXPENSE GOLF NEWSPAPER TENNIS MIXED $17, 000 $12, 000 $16, 000 $17, 000 34, 500 $12, 000 $50, 500 RADIO

ADVERTISING EXPENSE Direct expense Golf Tennis Total $17, 000 $12, 000 $29, 000 Indirect expense allocation: 62. 7% x $50, 500 37. 3% x $50, 500 31, 664 $31, 664 18, 836 $18, 836 $79, 500 The “mixed” costs are allocated based on the percentage of total sales.

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Operating expenses: Store clerks wages expense Truck drivers wages expense Advertising expense Store rent expense Bad debt expense Deprec. expense - delivery equip. Other operating expenses Total operating expenses Operating income Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 $54, 183 67, 430 48, 664 $26, 067 $ 16, 470 30, 836 80, 250 83, 900 79, 500 22, 800 17, 900 24, 000 350, 430 $ 658, 780 $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 Operating expenses: Store clerks wages expense $54, 183 $26, 067 $ 80, 250 Truck drivers wages expense 67, 430 16, 470 83, 900 Advertising expense 48, 664 30, 836 79, 500 Store rent expense 22, 800 Bad debt expense 17, 900 Deprec. expense - delivery 24, 000 Nextequip. we will split the rent. Other operating expenses 350, 430 Total operating expenses $ 658, 780 Operating income $ 90, 340

STORE RENT EXPENSE Golf Tennis Total Direct expense Indirect expense allocation: 64% x $22, 800 36% x $22, 800 $14, 592 $8, 208 $22, 800 All of the rent is considered indirect (“mixed”) and will be allocated based on square foot of floor space.

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Operating expenses: Store clerks wages expense Truck drivers wages expense Advertising expense Store rent expense Bad debt expense Deprec. expense - delivery equip. Other operating expenses Total operating expenses Operating income Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 $54, 183 67, 430 48, 664 14, 592 $26, 067 $ 16, 470 30, 836 8, 208 80, 250 83, 900 79, 500 22, 800 17, 900 24, 000 350, 430 $ 658, 780 $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 Operating expenses: Store clerks wages expense $54, 183 $26, 067 $ 80, 250 Truck drivers wages expense 67, 430 16, 470 83, 900 Advertising expense 48, 664 30, 836 79, 500 Store rent expense 14, 592 8, 208 22, 800 Bad debt expense 9, 000 8, 900 17, 900 Deprec. expense - delivery equip. 24, 000 Other operating expenses. All are direct expenses 350, 430 Total operating expenses $ 658, 780 and are assigned based on Operating incomeexperience with accounts written off. $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 Operating expenses: Store clerks wages expense $54, 183 $26, 067 $ 80, 250 Truck drivers wages expense 67, 430 16, 470 83, 900 Advertising expense 48, 664 30, 836 79, 500 Store rent expense 14, 592 8, 208 22, 800 Bad debt expense 9, 000 8, 900 17, 900 Deprec. Exp. - delivery equip. 24, 000 Other operating expenses 350, 430 3 trucks Total operating expenses $ 658, 780 1 exclusively for Golf, other two used for both Operating income $ 90, 340

DEPRECIATION EXPENSE DELIVERY EQUIPMENT Golf Direct expense $ 9, 000 Tennis $ 0 Indirect expense allocation: Depreciation on the one truck that is exclusively used for Golf equipment deliveries Total $ 9, 000

DEPRECIATION EXPENSE DELIVERY EQUIPMENT Golf Direct expense $ 9, 000 Tennis $ 0 Total $ 9, 000 Indirect expense allocation: 70% x $15, 000 30% x $15, 000 10, 500 $19, 500 10, 500 $ 4, 500 $24, 000 The other two trucks are allocated based on the dollar amount of equipment delivered.

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Operating expenses: Store clerks wages expense Truck drivers wages expense Advertising expense Store rent expense Bad debt expense Deprec. expense - delivery equip. Other operating expenses Total operating expenses Operating income Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 $54, 183 67, 430 48, 664 14, 592 9, 000 19, 500 $26, 067 $ 16, 470 30, 836 8, 208 8, 900 4, 500 80, 250 83, 900 79, 500 22, 800 17, 900 24, 000 350, 430 $ 658, 780 $ 90, 340

OTHER OPERATING EXPENSES Direct expense Indirect expense allocation: Golf Tennis Total $ 84, 420 $ 31, 980 $116, 400 159, 380 $243, 800 74, 650 $106, 630 234, 030 $350, 430 This broad range of expenses are assigned and allocated using many of the methods described previously.

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Operating expenses: Store clerks wages expense Truck drivers wages expense Advertising expense Store rent expense Bad debt expense Deprec. expense - delivery equip. Other operating expenses Total operating expenses Operating income Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 $54, 183 67, 430 48, 664 14, 592 9, 000 19, 500 243, 800 $26, 067 $ 80, 250 16, 470 83, 900 30, 836 79, 500 8, 208 22, 800 8, 900 17, 900 4, 500 24, 000 106, 630 350, 430 $ 658, 780 $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 Operating Income Percentages: Operating expenses: Golfexpense $72, 551 ÷ $1, 075, 000 Store clerks wages $54, 183= 6. 7% $26, 067 $ 80, 250 Tennis $17, 789 ÷ $640, 300 Truck drivers wages expense 67, 430= 2. 8% 16, 470 83, 900 Advertising expense 30, 836 79, 500 Just as with the Gross 48, 664 Profit %, Store rent expense 8, 208 22, 800 Golf is more profitable 14, 592 than Tennis. Bad debt expense 9, 000 8, 900 17, 900 Deprec. expense - delivery equip. 19, 500 4, 500 24, 000 Other operating expenses 243, 800 106, 630 350, 430 Total operating expenses $ 457, 169 $ 201, 611 $ 658, 780 Operating income $ 72, 551 $ 17, 789 $ 90, 340

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales Cost of goods sold Gross profit Total $1, 075, 000 $640, 300 $1, 715, 300 545, 280 420, 900 966, 180 $ 529, 720 $219, 400 $ 749, 120 Operating expenses: Operating Expense Percentages: Store clerks wages expense $54, 183 $26, 067 $ 80, 250 Truck drivers Golf wages $457, 169 expense ÷ $1, 075, 000 67, 430= 42. 5% 16, 470 83, 900 Tennis $201, 611 ÷ $640, 300 Advertising expense 48, 664= 31. 5% 30, 836 79, 500 Store rent expense 14, 592 8, 208 22, 800 Bad debt expense 9, 000 8, 900 17, 900 Deprec. expense - delivery equip. 19, 500 4, 500 24, 000 Other operating expenses 243, 800 106, 630 350, 430 Total operating expenses $ 457, 169 $ 201, 611 $ 658, 780 Operating income $ 72, 551 $ 17, 789 $ 90, 340

DIRECT OPERATING MARGIN § Difference between a department’s gross profit and its direct operating expenses § Indirect expenses are then subtracted from the total direct operating margin to calculated operating income o Indirect expenses are not allocated to specific departments

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales $1, 075, 000 Cost of goods sold 545, 280 Gross profit $ 529, 720 Direct operating expenses: Store clerks wages expense $36, 000 Truck drivers wages expense Direct Operating Margin helps us 29, 000 Advertising expense 17, 000 evaluate departmental performance. Bad debt expense 9, 000 Deprec. expense - delivery equip. 9, 000 Other operating expenses 84, 420 Total direct operating expenses $ 184, 420 Dept. direct operating margin $ 345, 300 Indirect operating expenses: Store clerks wages expense Total $640, 300 $1, 715, 300 420, 900 966, 180 $219, 400 $ 749, 120 $15, 250 $ 51, 250 29, 000 12, 000 29, 000 8, 900 17, 900 9, 000 31, 980 116, 400 $ 68, 130 $ 252, 550 $151, 270 $ 496, 570 $ 29, 000

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Total Net sales $1, 075, 000 $640, 300 $1, 715, 300 Cost of goods sold 545, 280 420, 900 966, 180 Gross profit $ 529, 720 $219, 400 $ 749, 120 Direct Operating Margin percentage Direct operating expenses: $345, 300 ÷ $1, 075, 000 = 32. 1% Store clerks wages. Golf expense $36, 000 $15, 250 $ 51, 250 Tennis $151, 270 ÷ $640, 300 = 23. 6% Truck drivers wages expense 29, 000 Golf is once again better! Is 17, 000 it because 12, 000 of the Advertising expense 29, 000 Gross Profit or Operating Expenses both? Bad debt expense 9, 000 or 8, 900 17, 900 Deprec. expense - delivery equip. 9, 000 Other operating expenses 84, 420 31, 980 116, 400 Total direct operating expenses $ 184, 420 $ 68, 130 $ 252, 550 Dept. direct operating margin $ 345, 300 $151, 270 $ 496, 570 Indirect operating expenses: Store clerks wages expense $ 29, 000

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Total Net sales $1, 075, 000 $640, 300 $1, 715, 300 percentage Cost of goods sold Direct Operating Expense 545, 280 420, 900 966, 180 Golf $184, 420 ÷ $1, 075, 000 = 17. 2% Gross profit $ 529, 720 $219, 400 $ 749, 120 Tennis $68, 130 ÷ $640, 300 = 10. 6% Direct operating expenses: This time Tennis$36, 000 is better!$15, 250 $ 51, 250 Store clerks wages expense Tennis is more effectively controlling their expenses, Truck drivers wages expense 29, 000 butexpense with Golf’s better Gross Profit, Golf still ended 29, 000 Advertising 17, 000 12, 000 with a better Direct Operating Bad debt expense 9, 000 Margin. 8, 900 17, 900 Deprec. expense - delivery equip. 9, 000 Other operating expenses 84, 420 31, 980 116, 400 Total direct operating expenses $ 184, 420 $ 68, 130 $ 252, 550 Dept. direct operating margin $ 345, 300 $151, 270 $ 496, 570 Indirect operating expenses: Store clerks wages expense $ 29, 000

Annie’s Sporting Goods Income Statement For Years Ended December 31, 20 -Tennis Golf Net sales $1, 075, 000 $640, 300 Cost of goods sold 545, 280 420, 900 Gross profit $ 529, 720 $219, 400 Direct operating Direct expenses: Operating Margin also helps us Store clerks wages expense $15, 250 determine the contribution$36, 000 a department Truck drivers wages 29, 000 income makesexpense to the overall operating Advertising expense 17, 000 12, 000 of the company. Bad debt expense 9, 000 8, 900 Deprec. expense - delivery equip. 9, 000 Other operating expenses 84, 420 31, 980 Total direct operating expenses $ 184, 420 $ 68, 130 Dept. direct operating margin $ 345, 300 $151, 270 Indirect operating expenses: Store clerks wages expense Total $1, 715, 300 966, 180 $ 749, 120 $ 51, 250 29, 000 17, 900 9, 000 116, 400 $ 252, 550 $ 496, 570 $ 29, 000

Total direct operating expenses Dept. direct operating margin Indirect operating expenses: Store clerks wages expense Truck drivers wages expense Advertising expense Store rent expense Deprec. expense - delivery equip. Other operating expenses Total indirect operating exp. Operating income $ 184, 420 $ 68, 130 $ 252, 550 $ 345, 300 $151, 270 $ 496, 570 Tennis department contributes $151, 270 to help cover the indirect operating expenses. $ 29, 000 54, 900 50, 500 22, 800 15, 000 234, 030 $ 406, 230 $ 90, 340

DISCONTINUING A DEPARTMENT § Management must focus on the revenues and expenses that will be eliminated if a department is discontinued. o Need to look at the Direct Operating Margin. o Indirect expenses are usually for the whole business and therefore will not be reduced when a department is discontinued.

DISCONTINUING A DEPARTMENT Net Sales Cost of Goods Sold Gross Margin Direct Operating Expenses Dept. Direct Oper. Margin Indirect Operating Expenses Operating income (loss) Dept A Dept B Dept C $210, 000 115, 000 $ 95, 000 55, 000 $ 40, 000 27, 000 $ 13, 000 $185, 000 110, 000 $ 75, 000 45, 000 $ 30, 000 22, 000 $ 8, 000 $170, 000 96, 000 $ 74, 000 54, 000 $ 20, 000 25, 000 $ (5, 000) Given the Net Loss, management is considering discontinuing Dept. C. Total $565, 000 321, 000 $244, 000 154, 000 $ 90, 000 74, 000 $ 16, 000

DISCONTINUING A DEPARTMENT Net Sales Cost of Goods Sold Gross Margin Direct Operating Expenses Dept. Direct Oper. Margin Indirect Operating Expenses Operating income (loss) Dept A Dept B Dept C $210, 000 115, 000 $ 95, 000 55, 000 $ 40, 000 27, 000 $ 13, 000 $185, 000 110, 000 $ 75, 000 45, 000 $ 30, 000 22, 000 $ 8, 000 $170, 000 96, 000 $ 74, 000 54, 000 $ 20, 000 25, 000 $ (5, 000) But Dept. C contributes $20, 000 to cover the indirect expenses!!! Without it, profits would be even worse!! Total $565, 000 321, 000 $244, 000 154, 000 $ 90, 000 74, 000 $ 16, 000