Required information [The following information applies to the questions displayed below.] 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. Sales Cost of goods sold Gross profit Operating expenses Direct expenses ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2017 Dept. 100 Dept. 200 Combined $450,000 $289,000 $739,000 261,000 209,000 470,000 189,000 80,000 269,000 Advertising 17,500 13,500 31,000 Store supplies used 4,500 4,200 8,700 Depreciation-Store equipment 4,200 3,200 7,400 Total direct expenses 26,200 20,900 47,100 Allocated expenses. Sales salaries Rent expense 78,000 46,800 124,800 9,450 4,760 14,210 Bad debts expense 9,700 7,500 17,200 Office salary 15,600 10,400 26,000 Insurance expense 2,100 1,400 3,500 Miscellaneous office expenses 2,000 1,300 3,300 Total allocated expenses 116,850 72,160 189,010 Total expenses 143,050 93,060 236,110 Net income (loss) $ 45,950 $(13,060) $ 32,890 In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $500 per week, or $26,000 per year, and four sales clerks who each earn $600 per week, or $31,200 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 17% of the miscellaneous office expenses presently allocated to it. 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 Direct expenses Allocated expenses Total Expenses Eliminated Continuing Expenses Expenses