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 Dept. 100 Dept. 200 Combined Sales $447,000 $288,000 $735,000 Cost of goods sold 270,000 209,000 479,000 Gross profit 177,000 79,000 256,000 Operating expenses Direct expenses Advertising 17,500 14,000 31,500 Store supplies used 4,000 3,500 7,500 Depreciation Store equipment 4,000 2,400 6,400 Total direct expenses 25,500 19,900 45,400 Allocated expenses Sales salaries 65,000 39,000 104,000 Rent expense 9,420 4,770 14, 190 Bad debts expense 9, 700 7, 700 17, 400 office salary 15,000 10, 400 26,000 Insurance expense 1,700 900 2,600 Miscellaneous office expenses 2,300 1,500 3,800 Total allocated expenses 163, 720 64,270 167,990 Total expenses 129,220 84,170 213, 390 Net income (loss) $ 47, 780 $ (5,170) $ 42,010 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: 71% of the insurance expense allocated to it to cover its merchandise inventory, and 15% 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 Total Eliminated Continuing Expenses Exponses Expenses Direct expenses Allocated expenses