A company has sales of $107,000; cost of goods sold of $68,870; and total direct expenses of $7,420. The department’ contribution to overhead is:
Question
A company has sales of 68,870; and total direct expenses of $7,420. The department’s contribution to overhead is:
Solution
To calculate the department's contribution to overhead, you first need to determine the gross profit, then subtract the total direct expenses.
Step 1: Calculate Gross Profit Gross Profit = Sales - Cost of Goods Sold Gross Profit = 68,870 = $38,130
Step 2: Subtract Total Direct Expenses Department's Contribution to Overhead = Gross Profit - Total Direct Expenses Department's Contribution to Overhead = 7,420 = $30,710
So, the department's contribution to overhead is $30,710.
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