ACC510O CONFIDENTIAL SULLI Net income ( loss ) 26 060 ( 1 760 ) 24 , 300 In analyzing whether to eliminate Department Z management considers the allowing items a . The company has one office worker who earns RM 250 per week . RM13 000 per year and four sales clerk who each earn RM 2 25 pe week or RM1 1 700 per year b . The full salaries of three sales clerk are charged to Department A . The full salary of one sales clerk is charged to Department z C . Eliminating Department I would avoid the sales salaries and the office salary current urgently allocated to it . However , management prefers anothe plan . Two salesclerk have indicated that they will be quitting soon Management believes that their work can be done by two remaining clerks if the one office worker works in sales half -time , Eliminating Department I 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 long term lease that cannot be hanged . Therefore , Department A will use the space and equipmen currently used by Department z e . Closing Department z will eliminate the expenses for advertising . bad debts and store supplies , 659 of the insurance expense allocated to i a cover its merchandise inventory ; and 30% of the miscellaneous office expenses presently allocated to it Required Prepare a three ( 3 ) column report that lists items and amounts for ( al he company's total expenses ( including cost of goods sold ) - in column ( b ) the expenses that would be eliminated by closing Department Z - in column 2 . ( c ) the expenses that will continue - in olumn 3 ( 10 marks ) Prepare a forecasted annual income statement for the company effecting the elimination of Department Z . assuming that it will not affect Department A's sales and gross profit . The stateme it should reflect the reassignment of the office worker to one-half time as a salesclerk ( 10 marks ) Reconcile the company's combined net income with the forecasted he income assuming that Department I is eliminated (list both items and amounts ) . Analyze the reconciliation and explain why you think the department should or should not be eliminated