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 $444,000 $289,000 733,000 212, 000 Sales Cost of goods sold Gross profit Operating expenses 261,000 183,00000473,000 77,000 260,000 Direct expenses Advertising Store supplies used Depreciation-Store equipment Total direct expenses 17,500 5,500 4, 800 27,800 14,000 5,100 3,700 22,800 31,500 10,600 8,500 50,600 Allocated expenses Sales salaries Rent expense Bad debts expense Office salary Insurance expense Miscellaneous office expenses Total allocated expenses 104,000 14,190 17,600 31,200 3,400 4,000 174,390 224,990 47,800 $ (12,790) 35,010 65,000 9,480 9,800 18,720 2,100 2,300 107,400 135, 200 39,000 4,710 7,800 12,480 1, 300 1,700 66,990 89,790 Total expenses Net income (loss) 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 b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to earn $500 per week, or $26,000 per year for each salesclerk 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 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; 67% of the insurance expense allocated to it to cover its merchandise inventory; and 17% of the miscellaneous office expenses presently allocated to it. oblem 10-6A Part 1 quired omplete the following report showing total expenses, expenses that would be eliminated by closing Department 200 and the penses 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 ExpensesExpenses ost of goods sold rect expenses Advertising Store supplies used Depreciation-Store equipment located expenses Sales salaries Rent expense Bad debts expense Problem 10-6A Part 1 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 Cost of goods sold Direct expenses Advertising Store supplies used Depreciation-Store equipment Allocated expenses Sales salaries Rent expense Bad debts expense Office salary Insurance expense Miscellaneous office expenses Total expenses