Problem 24-3A Departmental income statements; forecasts LO P3

Williams Company began operations in January 2015 with two operating (selling) departments and one service (office) department. Its departmental income statements follow.

WILLIAMS COMPANY Departmental Income Statements For Year Ended December 31, 2015
		Clock			Mirror		Combined
Sales	$	130,000		$	55,000		$	185,000
Cost of goods sold		63,700			34,100			97,800
Gross profit		66,300			20,900			87,200
Direct expenses
Sales salaries		20,000			7,000			27,000
Advertising		1,200			500			1,700
Store supplies used		900			400			1,300
DepreciationEquipment		1,500			300			1,800
Total direct expenses		23,600			8,200			31,800
Allocated expenses
Rent expense		7,020			3,780			10,800
Utilities expense		2,600			1,400			4,000
Share of office department expenses		10,500			4,500			15,000
Total allocated expenses		20,120			9,680			29,800
Total expenses		43,720			17,880			61,600
Net income	$	22,580		$	3,020		$	25,600

Williams plans to open a third department in January 2016 that will sell paintings. Management predicts that the new department will generate $50,000 in sales with a 55% gross profit margin and will require the following direct expenses: sales salaries, $8,000; advertising, $800; store supplies, $500; and equipment depreciation, $200. It will fit the new department into the current rented space by taking some square footage from the other two departments. When opened the new painting department will fill one-fifth of the space presently used by the clock department and one-fourth used by the mirror department. Management does not predict any increase in utilities costs, which are allocated to the departments in proportion to occupied space (or rent expense). The company allocates office department expenses to the operating departments in proportion to their sales. It expects the painting department to increase total office department expenses by $7,000. Since the painting department will bring new customers into the store, management expects sales in both the clock and mirror departments to increase by 8%. No changes for those departments gross profit percents or their direct expenses are expected except for store supplies used, which will increase in proportion to sales.

Required:

Prepare departmental income statements that show the companys predicted results of operations for calendar year 2016 for the three operating (selling) departments and their combined totals. (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)