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Required: Prepare departmental income statements that show the companys predicted results of operations for calendar-year 2018 for the three operating (selling) departments and their combined
Required: Prepare departmental income statements that show the companys 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 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 $ 140,000 $115,000 $ 255,000 Cost of goods sold 68,600 71,300 139,900 Gross profit 71,400 43,700 115,100 Direct expenses Sales salaries 20,000 7,200 27,200 Advertising 2,100 600 2,700 Store supplies used 700 400 1,100 Depreciation Equipment 800 2,300 Total direct expenses 24,300 9,000 33,300 Allocated expenses Rent expense 7,070 3,780 10,850 Utilities expense 2,700 2,200 4,900 Share of office department expenses 11,500 9,500 21,000 Total allocated expenses 21, 270 15,480 36,750 Total expenses 45,570 24,480 70,050 Net income $ 25,830 $ 19,220 $ 45,050 1,500 Williams plans to open a third department in January 2018 that will sell paintings. Management predicts that the new department will generate $49,000 in sales with a 75% gross profit margin and will require the following direct expenses: sales salaries, $7,500; advertising, $700, store supplies, $400, and equipment depreciation, $700. 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 $7,800. Since the painting department will bring new customers into the store, management expects sales in both the clock and mirror departments to increase by 13%. 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 salesStep by Step Solution
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