Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Department 1's contribution to overhead as a percent of sales is:
A) 52.5%
B) 20.0%
C) 35.7%
D) 30.0%
E) 57.1%

Question

Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Department 1's contribution to overhead as a percent of sales is: 
A) 52.5% 
B) 20.0% 
C) 35.7% 
D) 30.0% 
E) 57.1%

Quizplus · Accepted Answer

Sales − Cost of goods sold − Direct expenses = Contribution to overhead
1,000,000 − $700,000 − $100,000 = $200,000
Contribution to overhead/Sales = Contribution to overhead as a percent of sales
$200,000/$1,000,000 = 20%

Ultimo Co Operates Three Production Departments as Profit Centers