Answered step by step
Verified Expert Solution
Question
1 Approved Answer
4 Part 1 of 3 Required information (The following information applies to the questions displayed below.) Elegant Decor Company's management is trying to decide whether
4 Part 1 of 3 Required information (The following information applies to the questions displayed below.) Elegant Decor Company's management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The company's departmental income statements show the following. 5 points eBook Dept. 200 $ 284,000 209,000 75,000 Combined $ 730,000 474,000 256,000 Print References ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2019 Dept. 100 Sales $446,000 Cost of goods sold 265,000 Gross profit 181,000 Operating expenses Direct expenses Advertising 16,500 Store supplies used 5,500 Depreciation-store equipment 4,600 Total direct expenses 26,600 Allocated expenses Sales salaries 52,000 Rent expense 9,460 Bad debts expense 9,500 office salary 18,720 Insurance expense 2,100 Miscellaneous office expenses 2,700 Total allocated expenses 94,480 Total expenses 121,080 Net income (loss) $ 59,920 13,000 5,000 2,900 20,900 29,500 10,500 7,500 47,500 31,200 4,710 7,700 12,480 1,200 1,900 59,190 80,090 $ (5,090) 83,200 14,170 17,200 31,200 3,300 4,600 153,670 201, 170 $ 54,830 In analyzing whether to eliminate Department 200, management considers the following: 4 Total allocated expenses Total expenses Net income (loss) 94,480 121,080 $ 59,920 59,190 80,090 $ (5,090) 153,670 201,170 $ 54,830 Part 1 of 3 In analyzing whether to eliminate Department 200, management considers the following: 5 points eBook Print a. The company has one office worker who earns $600 per week, or $31,200 per year, and four salesclerks who each earns $400 per week, or $20,800 per year for each salesclerk. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. c. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office worker's salary would be reported as sales salaries and half would be reported as office salary. d. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200. e. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 68% of the insurance expense allocated to it to cover its merchandise inventory; and 20% of the miscellaneous office expenses presently allocated to it. References Required: 1. Complete the following report showing total expenses, expenses that would be eliminated by closing Department 200 and the expenses that would continue. The statement should reflect the reassignment of the office worker to one-half time as salesclerk. ELEGANT DECOR COMPANY Analysis of Expenses under Elimination of Department 200 Total Eliminated Continuing Expenses Expenses Expenses Direct expenses Allocated expenses Total expenses
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started