Problem: Renton Co. has two operating (production) departments supported by a number of service departments. The following information was collected for a recent period:
Direct Costs
Machining Assembly Indirect
Department Department Costs
Salaries $122,400 $ 85,700 $36,700
Insurance 20,200 11,000 5,500
Utilities 23,900 13,900 2,000
Depreciation 20,700 11,500 13,800
Maintenance 7,000 4,700 29,400
Office expenses 0 0 71,000
Cost of goods sold 327,600 121,200
Indirect costs are allocated as follows: salaries on the basis of sales, office expenses on the basis of the number of employees, and all other costs on the basis of square footage. Additional information about the production departments follows:
Square Number of
Footage Employees
Machining 14,535 78
Assembly 4,845 52
Sales for the Machining Department are $724,404 and sales for the Assembly Department are $356,796.
Determine the departmental contribution to overhead and the departmental net income for each production department. Show how you computed your answer.