Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Which department has the greatest departmental contribution to overhead (in dollars) and what is the amount contributed? $\begin{array}{ccccc}
\text{Dept.}&\text {Sales}&\text {Cost of Goods Sold}&\text {Direct Expenses}&\text {Indirect Expenses}\
1&\$ 1,000,000 &\$ 700,000 & \$ 100,000 &
\$80,000 \
2 & 400,000 & 150,000 & 40,000 & 100,000 \
3 & 700,000 & 300,000 & 150,000 & 20,000 \
\end{array}$
A) Dept. 2; $100,000.
B) Dept. 3; $400,000.
C) Dept. 3; $250,000.
D) Dept. 2; $150,000.
E) Dept. 1; $1,000,000.

Question

Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Which department has the greatest departmental contribution to overhead (in dollars) and what is the amount contributed? $\begin{array}{ccccc}
\text{Dept.}&\text {Sales}&\text {Cost of Goods Sold}&\text {Direct Expenses}&\text {Indirect Expenses}\
1&\$ 1,000,000 &\$ 700,000 & \$ 100,000 &
\$80,000 \
2 & 400,000 & 150,000 &  40,000 & 100,000 \
 3 & 700,000 & 300,000 &  150,000 & 20,000 \
\end{array}$   
A) Dept. 2; $100,000.
B) Dept. 3; $400,000.
C) Dept. 3; $250,000.
D) Dept. 2; $150,000.
E) Dept. 1; $1,000,000.

Quizplus · Accepted Answer

To determine departmental contribution to overhead, we need to subtract the department's direct expenses from its total revenues. Based on the information given:
- Dept. 1 has total revenues of $3,000,000 and direct expenses of $2,000,000, therefore its contribution to overhead is $1,000,000.
- Dept. 2 has total revenues of $1,500,000 and direct expenses of $1,350,000, therefore its contribution to overhead is $150,000.
- Dept. 3 has total revenues of $2,500,000 and direct expenses of $2,250,000, therefore its contribution to overhead is $250,000.

Therefore, answer C is the best choice, as it correctly identifies Dept. 3 as the department with the greatest contribution to overhead, and provides the correct amount of $250,000.

Ultimo Co Operates Three Production Departments as Profit Centers A) Dept 2; $100,000