21) Why would it be advisable for a company to keep separate accounting records for various



22) Prepare an income statement showing departmental contribution margin based on the following:


Dept. XDept. YRent Expense

Space (square feet)17,50035,000

Net Sales$60,000$ 40,000

Cost of Goods Sold18,00016,000

Rent Expense (allocated based on square feet)$2,700

23) Hawkeye Golf is considering dropping the clothing department because it is not generating a profit as disclosed by the following data:



Cost of Goods Sold800

Gross Profit on Sales$1,000

Direct Expenses700

Indirect Expenses500

Net Loss$( 200)


Note: None of the indirect expenses can be avoided by dropping the department.


Should Hawkeye drop the department? Show your computations.


24) Given the following, calculate contribution margin and net income:




Net Sales$7,500$3,900

Cost of Goods Sold4,1001,800


Operating Expenses (Indirect)$2,600




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