The departmental margin statement for the Personal Digital Assistant (PDA) department of DigitalHelp, Inc., for the years 20X8 and 20X9 is provided in the Working Papers. The company has set a goal for the PDA Department to contribute a minimum of 25.0% departmental margin. For the years 20X3 through 20X8, the departmental margin for the PDA Department has varied from 25.5% to 29.0% of net sales.

Instructions:

1. Calculate and record the component percentages for each item on the 20X9 departmental margin statement.

Round percentage calculations to the nearest 0.1%.

2. Calculate the changes in percentage of Net Sales from 20X8 to 20X9 for the following items:

(a) cost of merchandise sold,

(b) gross profit,

(c) total direct departmental expenses, and

(d) departmental margin.

3. From an analysis of the departmental margin statement and the amounts obtained from instructions 1 and 2, answer the following questions:

a. Is the departmental margin for the PDA Department at a satisfactory percentage of sales? Explain why it is or is not satisfactory.

b. Is the trend of the cost of merchandise sold percentage favorable or unfavorable? Explain why it is or is not favorable. Suggest some possible reasons for the change in cost of merchandise sold from 20X8 to 20X9.

c. Is the trend of the total direct departmental expenses percentage favorable or unfavorable? Explain why the trend is or is not favorable.