Help Jones Products manufactures and sells to wholesalers approximately 400,000 packages per year of underwater markers at $6 per package. Annual costs for the production and sale of this quantity are shown in the table. Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses $ 576,000 144,000 320,000 150,000 100,000 $1,290,000 int ances A new wholesaler has offered to buy 50,000 packages for $5.20 each. These markers would be marketed under the wholesaler's name and would not affect Jones Products's sales through its normal channels. A study of the costs of this additional business reveals the following: Direct materials costs are 100% variable. Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at 17 times the usual labor rate. Twenty-five percent of the normal annual overhead costs are fixed at any production level from 350,000 to 500,000 units. The remaining 75% of the annual overhead cost is variable with volume. . Accepting the new business would involve no additional selling expenses. . Accepting the new business would increase administrative expenses by a $5,000 fixed amount Required: Complete the three-column comparative Income statement that shows the following. (Do not round intermediate calculations and round per unit cost answers to 2 decimal places.) 1. Annual operating income without the special order. 2. Annual operating income received from the new business only. 3. Combined annual operating income from normal business and the new business. Per Unit Amounts Total Normal Volume New Business Normal Volume New Business Combined Sales Required: Complete the three-column comparative Income statement that shows the following. (Do not round Intermediate calculation round per unit cost answers to 2 decimal places.): 1. Annual operating Income without the special order. 2. Annual operating income received from the new business only. 3. Combined annual operating income from normal business and the new business. Per Unit Amounts Total Normal Volume New Business Normal Volume New Business Combined Sales Variable costs: Fixed costs 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 show the following. Dept. 200 $290,000 207,000 83,000 Combined $726,000 469,000 257,000 ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2017 Dept. 100 Sales $436,000 Cost of goods sold 262,000 Gross profit 174,000 Operating expenses Direct expenses Advertising 17,000 Store supplies used 4.000 Depreciation-Store equipment 5,000 Total direct expenses 26,000 Allocated expenses Sales salaries 65,000 Rent expense 9,440 Bad debts expenso 9,900 office salary 18,720 Insurance expense 2,000 Miscellaneous office expenses 2,400 Total allocated expenses 107,469 Total expenses 133,460 $ 40,540 Net income (loss) 12,000 3,800 3,300 19,100 29,000 7,800 8,300 45,100 39,000 4,720 8,100 12,480 1,100 1,600 67,000 86,100 $ (3,100) 104,000 14,160 18,000 31,200 3,100 4,000 174,460 219,560 $ 37,440 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 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, ter 23 i Saved c. Ellminating 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; 70% of the insurance expense allocated to it to cover its merchandise inventory, and 25% of the miscellaneous office expenses presently allocated to it. Problem 23-6A Part 1 es 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 requicu. 1. Complete the following report showing total expenses, expenses tha expenses that would continue. The statement should reflect the reassi ELEGANT DECOR COMPANY Analysis of Expenses under Elimination of Department 200 Total Eliminated Continuing Expenses Expenses Expenses Direct expenses Allocated expenses Total expenses 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 show the following. Dept. 200 $290,000 207,000 83,000 Combined $ 726,000 469,000 257,000 ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2017 Dept. 100 Sales $436,000 Cost of goods sold 262,000 Gross profit 174,000 Operating expenses Direct expenses Advertising 17,000 Store supplies used 4,000 Depreciation-store equipment 5,000 Total direct expenses 26,000 Allocated expenses Sales salaries 65,000 Rent expense 9,440 Bad debts expense 9,900 office salary 18,720 Insurance expense 2.000 Miscellaneous office expenses 2,400 Total allocated expenses 107,460 Total expenses 133, 460 Net Income (loss) $ 40,540 12,000 3,800 3,300 19, 100 29,000 7,800 8,300 45, 100 39,000 4, 720 8,100 12,480 1,100 1,600 67,000 86, 100 $ (3,100) 104,000 14,160 18,000 31,200 3,100 4.000 174,469 219,560 $ 37, 440 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 cam $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, mananamentnrefore anthornlan Tun enlerlerle have indicator that they will ha inn en Mannement 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; 70% of the insurance expense allocated to it to cover its merchandise Inventory, and 25% of the miscellaneous office expenses presently allocated to it. Problem 23-6A Part 2 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 Operating expenses Saved LT TUHUHY HIVI HUU UMIEJ I WIC YeJu muy u WCIUT. 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 show the following. Dept. 200 $290,000 207,000 83,000 Combined $726,000 469,000 257,000 ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2017 Dept. 100 Sales $436,000 Cont of goods sold 262,000 Gross profit 174,000 Operating expenses Direct expenses Advertising 17,000 Store supplies used 4,000 Depreciation-store equipment 5,000 Total direct expenses 26,000 allocated expenses Sales salaries 65,000 Rent expense 9,440 Bad debts expenso 9,900 Ottice salary 18,720 Insurance expense 2,000 Miscellaneous office expenses 2.400 Total allocated expenses 107.460 Total expenses 133,460 Set income (looo) $ 40,540 12,000 3,800 3,300 19,100 29,000 7,800 8,300 45,100 39,000 4,720 8,100 12,480 1,100 1,600 67,000 86.100 $ (3,100) 104,000 14,160 18,000 31,200 3,100 4.000 174,460 219.560 $ 37,440 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 eam $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 - Filminstinn Renartment will unit the sale salaries and their clan inte allerator HA Problem 23-6A Part 3 Analysis Component 3. Reconcile the company's combined net income with the forecasted net income assuming both items and amounts). (Amounts to be deducted should be indicated by a minus sign. nces ELEGANT DECOR COMPANY Reconciliation of Combined Income with Forecasted Income Combined net income Forecasted net income