Dropping Unprofitable Department

Thomas 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		$1,000,000	$900,000	$100,000
Cost of sales		631,000	558,000	73,000
Gross profit		369,000	342,000	27,000
Direct expenses		$144,000	$120,000	$24,000
Common expenses		107,000	96,000	11,000
Total expenses		251,000	216,000	35,000
Net income (Loss)		$118,000	$126,000	$(8,000)

Required

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