Problem 9-3A Departmental income statements; forecasts LO P3 Williams Company began operations in January 2017 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, 2017 Clock Mirror Combined Sales $ 240,000 $ 85,000 $ 325,000 Cost of goods sold 117,600 52,700 170,300 Gross profit 122,400 32,300 154,700 Direct expenses Sales salaries 22,500 7,300 29,800 Advertising 1,700 800 2,500 Store supplies used 1,100 700 1,800 Depreciation-Equipment 1,800 500 2,300 Total direct expenses 27,100 9,300 36,400 Allocated expenses Rent expense 7,060 3,540 10,600 Utilities expense 2,300 1,400 3,700 Share of office department expenses 13,500 8,500 22,000 Total allocated expenses 22,860 13,440 36,300 Total expenses 49,960 22,740 72,700 Net income $ 72,440 $ 9,560 $ 82,000 Williams plans to open a third department in January 2018 that will sell paintings. Management predicts that the new department will generate $56,000 in sales with a 85% gross profit margin and will require the following direct expenses: sales salaries, $7,500; advertising, $1,100; store supplies, $600; and equipment depreciation, $400. 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 for rent expensel. 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 $8,200. Since the painting department will bring new customers into the store, management expects sales in both the clock and mirror departments to increase by 9%. 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 company's predicted results of operations for calendar-year 2018 for the three operating (selling) departments and their combined totals. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2018 Clock Mirror Paintings Combined Direct expenses Total direct expenses Allocated expenses Total allocated expenses Total expenses
