Milo's Market operates four departments. Management is concerned about the financial results of the dried goods department,
Question:
Milo's Market operates four departments. Management is concerned about the financial results of the dried goods department, which has shown a loss for the past 3 years according to the company’s statement of financial performance. Competition in dried goods is exceptionally strong in the area in which the company operates. The departmental statement of financial performance for the year ended 30 June 2025 was as follows:
If the dried goods department is closed, direct expenses amounting to $13 000 would be shifted to the other three departments. In addition, indirect expenses of $4700 are unavoidable if the department is eliminated.
Required
(a) Calculate the departmental margin for the dried goods department.
(b) Should the dried goods department be closed down? Justify your answer.
(c) Prepare a statement of financial performance for the three remaining departments, assuming the dried goods department is dropped, to confirm
Step by Step Answer:
Accounting
ISBN: 9780730382737
11th Edition
Authors: John Hoggett, John Medlin, Keryn Chalmers, Claire Beattie