Dropping Unprofitable Department

Penn Corporation has four departments, all of which appear to be profitable except department 4. Operating data for 2019 are as follows:

		Total	Departments 1-3	Department 4
Sales		$1,052,000	$900,000	$152,000
Cost of sales		654,000	540,000	114,000
Gross profit		$398,000	$360,000	$38,000
Direct expenses		$177,000	$150,000	$27,000
Common expenses		140,000	120,000	20,000
Total expenses		$317,000	$270,000	$47,000
Net income (Loss)		$81,000	$90,000	$(9,000)

a. Calculate the gross profit percentage for departments 1-3 combined and for department 4.

Department 1-3 Answer______% Department 4 Answer_______%

b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.)

The firm's net income would be: Answer $______