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Required: 1. Complete the following report showing total expenses, expenses that would be eliminated by closing Department 200 an expenses that would continue. The statement

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Required: 1. Complete the following report showing total expenses, expenses that would be eliminated by closing Department 200 an expenses that would continue. The statement should reflect the reassignment of the office worker to one-half time as sales ELEGANT DECOR COMPANY Analysis of Expenses under Elimination of Department 200 Total Eliminated Continuing Expenses Expenses Expenses Direct expenses Allocated expenses Total expenses $ 0 $ 0 $ 0 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 shows the following. Dept. 200 $285,000 209,000 76,000 Combined $730,000 471,000 259,000 ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2017 Dept. 100 Sales $445,000 Cost of goods sold 262,000 Gross profit 183,000 Operating expenses Direct expenses Advertising 17,500 Store supplies used 4,000 Depreciation-Store equipment 4,400 Total direct expenses 25,900 Allocated expenses Sales salaries 65,000 Rent expense 9,440 Bad debts expense 9,600 Office salary 18,720 Insurance expense 1,700 Miscellaneous office expenses 2,500 Total allocated expenses 106,960 Total expenses 132,860 Net income (loss) $ 50,140 13,000 3,600 3,100 19,700 30,500 7,600 7,500 45,600 39,000 4,760 7,700 12,480 900 1,900 66,740 86,440 $(10,440) 104,000 14,200 17,300 31,200 2,600 4,400 173,700 219,300 $ 39,700 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, 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; 72% of the insurance expense allocated to it to cover its merchandise inventory; and 23% of the miscellaneous office expenses presently allocated to it

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