elegant decor companys managment is trying to decide whether to eliminate department 200,which has produced losses or low profits for sever years. The company's 2015 department income statements show the following:

In analyzing whether to eliminate department 200, managment 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 sales clerk.

b. The full salaries of the two salesclerks are charged to Department 100. The full salar of the one salesclerk is charged to Department 200.The salar 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 prefersanother plan. Two salesclerks have indicated that they will be quitting soon. Managment believes that their work can be done by the other two clerks if the one office worker works in sales half tim. 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 salaries.

d. the store building is rented under a long term lesase hat cannot be changed. therefore, dept 100 will use the space and equipt. currently used by dept 200/

e. closing dept 200 will elminate its expenses for advertising, bad debts, and store supplies, 70% of the insurances expense allocated it to cover its merchandise inventory; and 25% of the miscellaneous office expenses presently allocated to it.

Required:

1.Prepare a three column report that lists items and amounts for (A) the companys total expenses (including cost of goods sold)- in column 1, (B) the expenses that would be eliminated by closing dept 200 in column 2, and C the expenses that will continues in column 3

2. prepare a forecasted annual income statement for the company reflecting the elimination of dept 200 assuming that it will not affect the dept 100 sales and gross profit. the statement should reflect the reassignment of the office worker to one half time as the sales clerk.

reconcile the companys combined net income with the forecasted net income assuming that dept 200 is eliminated (list both amounts). analyze the reconciliation and explain why you think the dept should or should not be elminated.