Decision Making...

M Department Store has 5 departments- MI, M2, M3, M4, and M5. Department MS is being evaluated using the data below for the store. All Others Dept, M5 Total Sales P4,500,000 P500,000 P5,000,000 Cost of Sales 2,200,000 300,000 2,500,000 Gross Profit P2,300,000 P200,000 P2,500,000 Rent and services P800,000 P200,000 P1,000,000 Direct salaries 450,000 50,000 500,000 Advertising allocation 450,000 50,000 500,000 Total expenses P1,700,000 P300,000 P2,000,000 Net income P600,000 P(100,000) P500,000 Rent and services is a corporate committed fixed expense and is allocated evenly to the five departments. Advertising will not change regardless of the decision, and is allocated using sales revenue. M Department Store is evaluating Department M5's future. REQUIRED: 1. Comment on the following statements about Department M5: a. It is earning P100,000 in variable CM for M Department Store. b. It is earning P150,000 in direct CM for M Department Store. c. It is a P100,000 drain on the profitability of M Department Store. d. The company's overall profitability without Department M5 would be P600,000