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 2013 departmental income statement shows the following. ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2013 Dept. 100 Dept. 200 Combined Sales $ 449,000 $ 289,000 $ 738,000 Cost of goods sold 267,000 214,000 481,000 Gross profit 182,000 75,000 257,000 Operating expenses Direct expenses Advertising 16,500 13,500 30,000 Store supplies used 5,500 5,100 10,600 DepreciationStore equipment 4,400 2,800 7,200 Total direct expenses 26,400 21,400 47,800 Allocated expenses Sales salaries 65,000 39,000 104,000 Rent expense 9,440 4,760 14,200 Bad debts expense 9,400 7,400 16,800 Office salary 21,840 14,560 36,400 Insurance expense 2,300 1,400 3,700 Miscellaneous office expenses 2,300 1,600 3,900 Total allocated expenses 110,280 68,720 179,000 Total expenses 136,680 90,120 226,800 Net income (loss) $ 45,320 $ (15,120 ) $ 30,200 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, 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 workers 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; 67% of the insurance expense allocated to it to cover its merchandise inventory; and 25% of the miscellaneous office expenses presently allocated to it.