Elegant Decor Company's management is trying to decide whether to eliminate Department 200, hich 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 Sales Cost of goods sold Gross profit Operating expenses $441,000 $285,000 $726,000 212,00047500 251,000 263,000 178,000 73,000 Direct expenses Advertising Store supplies used Depreciation-Store equipment Total direct expenses 17,000 6,000 13,500 5,500 2,500 30,500 11,500 6,700 48,700 4.200 S 27,200 Allocated expenses Sales salaries Rent expense Bad debts expense Office salary Insurance expense Miscellaneous office expenses Total allocated expenses 39,000 4,780 65,000 9,450 9,500 18,720 2,100 2,300 104,000 14,230 16,900 31,200 3,500 3,900 66,660173,730 88,160-222,430 12,480 1,400 1,600 107,07 134,270 Total expenses Net income (loss) 43,730 (15,160) 28,570 In analyzing whether to eliminate Department 200, management considers the following a. 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. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one ealoerlerk ie charred to nenartment nn Tho calan, nf thea fnirth rlark whn un rec half-timo in In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $600 per week, or $31,200 per year, and four b. The full salaries of two salesclerks are charged to Department 100. The full salary of one c. Eliminating Department 200 would avoid the sales salaries and the office salary currently sales clerks who each earn $500 per week, or $26,000 per year for each salesclerk. 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 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; 69% of the insurance expense allocated to it to cover its merchandise inventory; and 19% 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 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 ELEG T DECOR COMPANY Forecasted Annual Income Statement Under Plan to Eliminate Department 200 0 Next > Prev 781 of 8111