Please answer 1-3

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 $287,000 214,000 73,000 Combined $ 733,000 474,000 259,000 ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2019 Dept. 100 Sales $ 446,000 Cost of goods sold 260,000 Gross profit 186,000 Operating expenses Direct expenses Advertising 17,500 Store supplies used 5,500 Depreciation-Store equipment 4,000 Total direct expenses 27,000 Allocated expenses Sales salaries 52,000 Rent expense 9,440 Bad debts expense 9,8100 Office salary 18,720 Insurance expense 2,500 Miscellaneous office expenses 2,300 Total allocated expenses 94,760 Total expenses 121,760 Net income (loss) $ 64,240 13,500 5, 100 2,800 21,400 31,000 10,600 6,800 48,400 31,200 4,800 7,500 12,480 1,700 1,600 59,280 80,680 $ (7,680) 83,200 14,240 17,300 31,200 4,200 3,900 154,040 202,440 $ 56,560 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 $400 per week, or $20,800 per year for each salesclerk. 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 $400 per week, or $20,800 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 implernented, 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; 66% of the insurance expense allocated to it to cover its merchandise inventory: and 16% of the miscellaneous office expenses presently allocated to it. - of 3 >ISIS Analysis of Expenses under Elimination of Department 200 Total Eliminated Continuing Expenses Expenses Expenses Cost of goods sold $ 474,000 $ 214,000$ 260,000 Direct expenses Advertising 31,000 13,500 17,500 Store supplies used 10,600 5,100 5,500 Depreciation Store equipment 6,800 2,800 4,000 Allocated expenses Sales salaries 83,200 31,200 52,000 Rent expense 14,240 4,800 9,440 Bad debts expense 17,300 7,500 9,800 Office salary 31,200 12,480 18,720 Insurance expenso 4,200 1,700 2,500 Miscellaneous office expenses 3,900 1,600 2,300 Total expenses $ 676,440 $ 294,680 $ 381,760 >ISISISIS 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 Total operating expenses Problem 10-6A Part 3 3. Should Department 200 be eliminated? Should Department 200 be eliminated