Question
ACCT 605 Pre Final Assessment PART A You are a retailer that has multiple departments. While analyzing the net income on a department by department
ACCT 605 Pre Final Assessment
PART A
You are a retailer that has multiple departments. While analyzing the net income on a department by department level, you realize that one department is operating at a net loss. Determine whether shutting down the department makes sense and the estimated net impact to the business if this department is shut down:
a) | If Department B is closed, their sales and cost of goods sold will drop to zero. |
b) | Since some customers shop at our store because we offer many different products, we estimate the foot traffic in the store will also drop. Therefore, we expect to lose $25,000 in sales between Dept A & C. The projected cost of goods sold on these forgone sales is 60% |
c) | Salaries Expense for the total company is evenly split between all departments. If you close Dept B, you can cut some staff hours. The estimated total Salaries Expense for the organization would then drop to $65,000. |
d) | Total Utilities Expense will remain the same as you will continue to operate from the same building and incur the same heating and lighting expenses for the building as a whole. |
e) | The capital assets for Dept B has little to no resale value. The assets currently being used by Dept B will likely be scraped. |
f) | The organization is likely to save all the "Other" expenses incurred by Dept B if Dept B is closed. |
For 12 Months of Operations
| Dept A | Dept B | Dept C | Total |
Sales | $300,000 | $350,000 | $250,000 | $900,000 |
Cost of Goods Sold | 204,000 | 297,500 | 137,500 | 639,000 |
$96,000 | $52,500 | $112,500 | $261,000 |
28,000 | 28,000 | 28,000 | 84,000 |
6,000 | 6,000 | 6,000 | 18,000 |
5,000 | 5,000 | 5,000 | 15,000 |
5,000 | 5,000 | 5,000 | 15,000 |
$52,000 | $8,500 | $68,500 | $129,000 |
Gross Margin Operating Expenses: Salaries Utilities
Depreciation
Other Operating Profit (Loss)
Additional Information:
PART B
Fehler Incorporated is forecasting their cash collections from customers for the months of
January to March. Use the following details to project the timing of cash inflows from sales:
Projected # of Units Sold: January 225 February 275 March 175 Sales $ per Unit $125 |
|
$ of Credit Sales from December to be collected in January | $4,000 |
Historical Sales Trend:
30% of Monthly Sales are Cash
70% of Monthly Sales are on Credit
70% of Credit Sales are Collected in the Month of the Sale
20% of Credit Sales are Collected in the Month after the Sale
10% of Credit Sales are Never Collected (Bad Debts)
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