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: Dept. Sales Cost of Goods Sold Direct Expenses 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

12%

Explanation:

Contribution can be defined as the portion sales revenue that covers the fixed cost as it is not consumed by the variable cost.

Workings

Dept.  Sales      Cost of goods   Direct Expenses  Indirect exp  Contribution

1         1,000,000  700,000             100,000                80,000        120,000

2          400,000   150,000               40,000                100,000       110,000

3          700,000   300,000              150,000                 20,000      230,000

Contribution= sales revenue - direct cost and direct expenses

For Department 1 =

Contribution = 1,000,000 -700,000-100,000-80,000 = 120,000

Contribution as a percentage of sale =

Sales = 1,000,000

Contribution = 120,000

120,000/1,000,000*100 = 12%

years agooo ahaha. but honestly they need to update ! : )

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