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 Erided December 31, 2017 Dept. 100 $442,000 261,000 181,000 Dept. 200 $284,000 209,000 75,e00 Combined Sales $726,000 470,000 256,000 Cost of goods sold Gross profit Operating expenses Direct expenses Advertising Store supplies used Depreciation-store equipment Total direct expenses Allocated expenses Sales salaries 17,000 4,see 13,500 4,000 3,00e 20,500 3e, see 8,500 4,200 25,700 7,200 46, 200 65,e00 9,410 9,600 21,840 2,300 2,600 110,750 136,450 39,000 4,770 7,300 104,000 14,180 16,900 36,400 3,800 4,600 179, 880 226,ese Rent expense Bad debts expense Office salary Insurance expense Miscellaneous office expenses Total allocated expenses 14,560 1,500 2,000 69,130 89,630 $(14,630) Total expenses Net income (loss) $ 29,920 $ 44,550 In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $700 per week, or $36,400 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 c. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However managemert 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; 73 % of the insurance expense allocated to it to cover its merchandise inventory, and 23% of the miscellaneous office expenses presently allocated to it. 2. Prepare a forecasted annual income statement for the company reflecting the elimination of Department 200 assuming that it will not affect Department 100's sales and gross profit. The statement should reflect the reassignment of the office worker to one-half time as a salesclerk ELEGANT DECOR COMPANY Forecasted Annual Income Statement Under Plan to Eliminate Department 200 Operating expenses Total operating expenses