Elegant Decor Companys management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The companys departmental income statements show the following.

Required information Problem 25-6A Analyzing possible elimination of a department LOP4 The following information applies to the questions displayed below) 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 departmental income statements show the following. Dept. 200 Combined $285,000 $730,000 210, 000471,000 75,000 259,000 ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2019 Dept. 100 Sales $445,000 Cost of goods sold 261,000 Gross profit 184,000 Operating expenses Direct expenses Advertising 17,000 Store supplies used 5,000 Depreciation-store equipment 4,200 Total direct expenses 26,200 Allocated expenses Sales salaries 65,000 Rent expense 9,410 Bad debts expense 9,500 Office salary 18,720 Insurance expense 2,300 Miscellaneous office expenses 2,700 Total allocated expenses 107,630 Total expenses 133,830 Net income (loss) $ 50, 170 13,500 4,500 2,600 20,600 30,500 9,500 6,800 46,800 39,000 4,790 7,700 12,480 1,600 1,900 67,470 88,070 $(13,070) 104,000 14,200 17,200 31,200 3,900 4,600 175, 100 221,900 $ 37,100 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 salesclerks who each earns $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 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. ELEGANT DECOR COMPANY Analysis of Expenses under Elimination of Department 200 Total Eliminated Continuing Expenses Expenses Expenses Direct expenses Allocated expenses Total expenses