7. Part 2 of 3 7 points book Required information Problem 23-6A Analyzing possible elimination of a department LO P4 {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 Josses or low profits for several years. The company's departmental Income statements show the following KERANT BECOR CORONY Departmental Income statements For Year Ended December 31, 2015 Dept. 100 Dept. 200 Combined Sales $441,000 $286.000 $727,000 Coat of goods sold 262.000 210.000 472,000 Cross proti 179,000 176,000 255,000 Operating expenses Direct sense Mivertising 17.000 13,500 30.500 tore supplles ved 6.000 5.600 11,600 Depreciation or equipent 4.600 3000 3600 Total dit expenses 277600 22,100 09.700 Allocated expenses tales salari 78.000 26.000 124.800 at open Sad date 9.420 4.720 14.140 9.400 7.300 16700 o te Tape 18,120 12.40 91,200 1300 700 Miscellaneous to 2,200 2100 100 Total allocated on 3.000 110 1900 040 146242 00 2422540 Notices 2,060 19.600 12.460 In analyzing whether to eliminate Department 200, management considers the following: 32 of 3 In analyzing whether to eliminate Department 200, management considers the following: nts eBook a. The company has one office worker who earns $600 per week, or $31.200 per year, and four salesclerks who each earns $600 per week, or $31,200 per year for each salesclerk. b. The full salaries of two salesclerks are charged to Depament 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 wil eliminate its expenses for advertising, bad debts, and store supplies, 70% of the insurance expense allocated to it to cover its merchandise Inventory, and 24% of the miscellaneous office expenses presently allocated to it Problem 23-6A Part 2 2. Prepare a forecasted annual income statement for the company reflecting the elimination of Department 200 assuming that it will not affect Department 100's sales and gross profit. The statement should reflect the reassignment of the office worker to one-half time as a salesclerk 7 Required Information 2. Prepare a forecasted annual income statement for the company reflecting the elimination of Department 200 assuming that it will not affect Department 100's sales and gross profit. The statement should reflect the reassignment of the office worker to one-half time as a salesclerk Part 2 of 3 7 points ELEGANT DECOR COMPANY Forecasted Annual Income Statement Under Plan to Eliminate Department 200 Operating en Totalenting