Assume you are the department B manager for Marley’s Manufacturing. Marley’s operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation. MARLEY'S MANUFACTURING
Income Statement
Month Ending August 31, 2018
Dept A Dept B
Sales $22,000 $51,000
Cost of goods sold 10,560 26,520
Gross profit $11,440 $24,480
Utility expenses 1,000 3,200
Wages expense 5,500 10,200
Costs allocated from corporate 2,200 15,000
Total expenses $8,700 $28,400
Operating income/(loss) $ ? ?
Operating income/(loss) % ? ?
Which of these costs may need further investigation? Why? (Hint: It may be helpful to perform a vertical analysis.)