Elegant Decor Company's management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The company's 2017 departmental income statements shows the following. ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Dept. 100 Dept. 200 Combined $448,000 $287,000 $735,000 265,000 211,000 476,000 183,000 76,000 259,000 Operating expenses Direct expenses Advertising 17,000 14,000 31,000 Store supplies used 5,000 4,500 9,500 Depreciation-Store equipment 4,000 2,600 6,600 Total direct expenses 26,000 21,100 47,100 Allocated expenses Sales salaries Rent expense Bad debts expense Office salary Insurance expense Miscellaneous office expenses Total allocated expenses Total expenses 65,000 39,000 104,000 9,420 4,730 14,150 9,500 7,300 16,800 15,600 10,400 26,000 1,500 600 2,100 2,700 2,100 4,800 103,720 64,130 167,850 129,720 85,230 214,950 Net income (loss) $ 53,280 $ (9,230) $ 44,050 In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $500 per week, or $26,000 per year, and four sales clerks who each earn $500 per week, or $26,000 per year for each salesclerk. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. c. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office worker's salary would be reported as sales salaries and half would be reported as office salary. d. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200. e. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 65% of the insurance expense allocated to it to cover its merchandise inventory; and 22% of the miscellaneous office expenses presently allocated to it. Required: 1. Complete the following report showing total expenses, expenses that would be eliminated by closing Department 200 and the expenses that would continue. The statement should reflect the reassignment of the office worker to one-half time as salesclerk. ELEGANT DECOR COMPANY Analysis of Expenses under Elimination of Department 200 Cost of goods sold Direct expenses Advertising Store supplies used Depreciation-Store equipment Allocated expenses Sales salaries Rent expense Bad debts expense Office salary Insurance expense Miscellaneous office expenses Total expenses Total Expenses Eliminated Expenses Continuing Expenses $ 0 $ 0 $ 0