Overhead And Net Income Calculation Research Paper And Presentation

timer Asked: Feb 14th, 2019
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Question Description

Read Problem 9-4A in your textbook and answer the questions that follow. Your response should be 4 to 6 pages long, including attachments and follow APA format.

Also read Problem 10-6A in your textbook and answer the questions that follow.

Your response should be 2-3 pages long, including attachments and follow APA format.

CLA2 Comprehensive Learning Assessment (CLA 2) Presentation In addition to your CLA2 report, please prepare a professional PowerPoint presentation summarizing your findings for CLA2. The presentation will consist of your major findings, analysis, and recommendations in a concise presentation of 15 slides (minimum). You should use content from your CLA2 report as material for your PowerPoint presentation.

Textbook to use is:

Managerial Accounting 5th edition
John J. Wild University of Wisconsin at Madison Ken W. Shaw University of Missouri at Columbia








Tutor Answer

School: University of Virginia

Hey! Kindly find the attached answer. Thank you

Overhead and Net Income
Student’s Name


Problem 9-4A - Determine the departmental
contribution to overhead and the
departmental net income

Departmental contribution to overhead refers to the sum of money that is
available in one department after the direct expenses are paid to assist in
paying for the overhead of a company.

It is calculated as follows:

Departmental contribution to overhead= Departments revenue – direct expenses

In the case of Vortex Company, there are two departments; A and B. The
sales are $800,000 and $450,000 from department A and department B

The cost of goods sold (COGS) are $497,000 for department A and $291,000
for department B.

From the above information; the gross margin can be calculated for the two
Gross margin = Sales - COGS

Gross margin = Sales - COGS

Therefore, gross margin will be:
Department A = $800,000 - $497,000 = $303,000
Department B = $450,000 - $291,000 = $159,000

Direct expense

The direct expenses refer to all the incurred expenses which vary directly
with the changes in the volume of cost object.

The total direct expenses are calculated by adding each direct expense
from the departments.

Therefore, total direct expenses will be;
Department A =$125,000 + $20,000 + $24,000 + $21,000 + $7,000 = $
Department B = $88,000 + $10,000 + $14,000 + $12,000 + $$5,000 =


Therefore, departmental contribution to overhead will be:

Department A = $303,000 - $197,000 = $106,000

Department B = $159,000 - $ 129,000 = $30,000

Departmental net income refers to the net sales in a department when all
the expenses are subtracted.

Vortex Company will realize its net income when all the costs from
department A and department B are taken out.

The allocated indirect expense for the company is as follows:






Office expenses


There is a need to calculate the indirect expense for each department as this
will help in calculating the departmental net income. Thus, to find out the
cost of salaries for both the departments, total sales from both the
companies will be required.

Total sales = Sales from department A + Sales from department B

= $800,000 + $450,000 = $1,250,000

To calculate the percentage of each department, the formula used will be:

𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠

× 100

Department A =


× 100 = 64%

Department B =


× 100 = 36%

Therefore, the salaries amount for both departments will be calculated as

Department A =


× $36,000 = $23,040

Department B =


× $36,000 = $12,960

Indirect expenses

Indirect expenses refer to all the expenses that are incurred in the operating

process of a company.

This can be either as a whole or a segment of the company and thus cannot
be directly linked to the cost object.

In the case of Vortex Company, the indirect expenses are provided as a whole,
but from the given information, departmental indirect expenses can be

To calculate the indirect expenses (insurance and depreciation) for each
department, departmental square footage will be used.

The square footage is 28,000 for department A and 12,000 for department B.

The total square footage for the company is; = 28,000 + 12,000 = 40,000

To calculate the percentage of all the other expenses, the following formula
𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡𝑎 𝑆𝑞.𝑓𝑡
will be used; =
× 100
𝑇𝑜𝑡𝑎𝑙 𝑆𝑞.𝑓𝑡

Insurance expenses will be as follows;

Department A=

Department B =


× 100 = 70% =


× 100 = 30% =


Depreciation expenses will be:

× $6,000 = $4,200

Department A =

× $15,000 = $10,500

Department B

× $15,000 = $4,500

× $6,000 = $1,800

For office expenses, the provided number of employees will be used.

The n...

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Good stuff. Would use again.

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