Confirm the conclusion you reached in Requirement a by preparing income statements for the company as a whole with and without the children’s department.

 

Thornton Boot Company sells men's, women's, and children's boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men's department has a sales staff of nine employees, the manager of the women's department has six employees, and the manager of the children's department has three employees. All departments are housed in a single store. In recent years, the children's department has operated at a net loss and is expected to continue to do so. Last year's income statements follow. Sales Cost of goods sold Gross margin Department manager's salary Sales commissions Rent on store lease Store utilities Net income (loss) Req A Req B Req C Sales Cost of goods sold Gross margin Department manager's salary Sales commissions Rent on store lease Store utilities Net income (loss) $ GA Men's Department $ 700,000 (273,500) 426,500 (68,000) (122,200) (37,000) (20,000) $ $ 179,300 Confirm the conclusion you reached in Requirement a by preparing income statements for the company as a whole with and without the children's department. Note: Enter amounts to be deducted with a minus sign. Keep Children's Department 1,400,000 $ (56,371) X 838,825 162,000 X 249,700 X 11,000 X 6,000 X 256,125 Women's Department $ 500,000 (182,800) 317,200 (57,000) $ (91,600) (37,000) (20,000) $ 111,600 Eliminate Children's Department 1,200,000 45,550 X 743,700 125,000 X 2,148,000 X 11,000x 6,000 X Children's Department $ 200,000 (104,875) 95, 125 (37,000) (35,900) (37,000) (20,000) $ (34,775) 233,900