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		$1,100,000	$940,000	$160,000
Cost of sales		695,000	573,400	121,600
Gross profit		405,000	366,600	38,400
Direct expenses		$177,000	$150,000	$27,000
Common expenses		138,800	119,400	19,400
Total expenses		315,800	269,400	46,400
Net income (Loss)		$89,200	$97,200	$(8,000)

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