Jansen Company reports the following for its ski department for the year 2017. All of its costs are direct, except as noted. Sales $ 615,000 Cost of goods sold 435,000 Salaries 111,000 ($25,200 is indirect) Utilities 16,300 ($5,300 is indirect) Depreciation 53,600 ($17,300 is indirect) Office expenses 26,600 (all indirect) 1. Prepare a departmental income statement for 2017. 2. & 3. Prepare a departmental contribution to overhead report for 2017. Based on these two performance reports, should Jansen eliminate the ski department?

a. The preparation of departmental contribution to overhead report for 2017 is shown below:-

Jansen Company

Departmental Income Statement-Ski Department

For Year Ended December 31, 2017

Sales $615,000

Cost of goods sold $435,000

Gross profit $180,000

Direct expenses

Salaries $111,000

Utilities $16,300

Depreciation $53,600

Office expenses $26,600

Operating loss - $27,500

b. Departmental contribution to overhead = Gross profit of the department - All direct expenses of that department

Jansen Company

Departmental Contribution to Overhead-Ski Department

For Year Ended December 31, 2017

Sales $615,000

Cost of goods sold $435,000

Gross profit $180,000

Direct expenses

Salaries $85,800

($111,000 - $25,200)

Utilities $11,000

($16,300 - $5,300)

Depreciation $36,300

($53,600 - $17,300)

Total direct expenses $133,100

Contribution to overhead $166,690

3.

No, Jansen should not eliminate the Ski Department