Collosal Entertainment began operations in January 2009 with two operating (selling) departments and one service (office) department. Its departmental income statements follow.

The company plans to open a third department in January 2010 that will sell compact discs. Management predicts that the new department will generate $450,000 in sales with a 35% gross profit margin and will require the following direct expenses: sales salaries, $27,000; advertising, $15,000; store supplies, $3,000; and equipment depreciation, $1,800. The company will fit the new department into the current rented space by taking some square footage from the other two departments. When opened, the new compact disc department will fill one-fourth of the space presently used by the movie department and one-third of the space used by the video game department. Management does not predict any increase in utilities costs, which are allocated to the departments in proportion to occupied space (or rent expense). The company allocates office department expenses to the operating departments in proportion to their sales. It expects the compact disc department to increase total office department expenses by $15,000. Since the compact disc department will bring new customers into the store, management expects sales in both the movie and video game departments to increase by 8%. No changes for those departments€™ gross profit percents or for their direct expenses are expected, except for store supplies used, which will increase in proportion to sales.
Required
Prepare departmental income statements that show the company€™s predicted results of operations for calendar year 2010 for the three operating (selling) departments and their combined totals. (Round percents to the nearest one-tenth and dollar amounts to the nearest wholedollar.)

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COLLOSAL ENTERTAINMENT Departmental Income Statements For Year Ended December 31, 2009 Movles Video Games Combined 900,000 $300.000 $1,200,000 861,000 339,000 ...$ Cost of goods sold...630,000 . 270.000 231.000 69,000 Gross profit Direct expenses 78,000 27,750 7,500 11,250 124,500 Sales salarles. 22,500 9.000 1500 4,500 37500 .55,500 18,750 6,000 6,750 87.000 ent .- Allocated expenses .. 61.500 Utilities expense^11070 Share of office department expenses.84.375 56,945 13,500 2,430 28.125 44,055 75,000 13,500 112,500 201,000 Total allocated expenses 81,555 32550 Total expenses Net Income (loss) . ..^26,055 $(12.555) 3,500