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, 2017Dept. 100Dept. 200CombinedSales$448,000$286,000$734,000Cost of goods sold260,000209,000469,000Gross profit188,00077,000265,000Operating expensesDirect expensesAdvertising16,00011,50027,500Store supplies used4,0003,6007,600DepreciationStore equipment4,0002,8006,800Total direct expenses24,00017,90041,900Allocated expensesSales salaries65,00039,000104,000Rent expense9,4804,77014,250Bad debts expense9,8007,40017,200Office salary18,72012,48031,200Insurance expense2,1001,4003,500Miscellaneous office expenses2,2001,5003,700Total allocated expenses107,30066,550173,850Total expenses131,30084,450215,750Net income (loss)$56,700$(7,450)$49,250

In analyzing whether to eliminate Department 200, management considers the following:

1. The company has one office worker who earns $600 per week, or $31,200 per year, and four sales clerks who each earn $500 per week, or $26,000 per year for each salesclerk.
2. 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.
3. 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.
4. 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.
5. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 75% of the insurance expense allocated to it to cover its merchandise inventory; and 18% 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.

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 Total Eliminated Continuing Expenses Expenses Expenses Cost of goods sold Direct expenses Advertising 27,500 11,500 16,000 Store supplies used 7,600 3,600 4,000 Depreciation-Store equipment 6,800 6,800 Allocated expenses Sales salaries 104,000 Rent expense 14,250 Bad debts expense 17,200 Office salary 31,200 Insurance expense 3,500 Miscellaneous office expenses 3,700 Total expenses $ 215,750 $ 15, 100 $ 26,800