Requirements: - Prepare a departmental income statement that shows the company's predicted results of operations for calendar year 2014 for the three profit centers and their combined totals. - Operating Expenses and Service Department Charges must be separately listed on the departmental income statement. - Prepare a separate sheet that includes all the required calculations for the new department (Paintings) and the revised calculations for the Clock \& Mirror departments. All calculations must be labeled. For example, when calculating the gross profit and cost of goods sold percentages, the calculations must be labeled with these names (Calculations for Gross Profit: Calculations for Cost of Goods Sold). All calculations must include words and numbers. - Service Department Charges (Rounding Errors): There are two methods for calculating the Service Department Charges. - The Canvas Demonstration Video illustrates one method, which uses percentages. - If this method is used, it is important to round all percentages to two decimal points ( 15.56% ). If not, rounding errors will occur. - The textbook also demonstrates a method for calculating Service Department Charges. The textbook example uses dollars to calculate the charges. If this method is used, it is important to round dollars to five decimal points (.37012). - This is a challenging problem. Therefore. I recommend slowly reading the instructions. Additional Information: The company plans to open a third department in January 2014 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 operating expenses: sales salaries $8.000; advertising $800 : Store Supplies $500 : and Depreciation-Equipment $200. It will fit the new department into the current rented space by taking some square footoge from the other two deportments. When opened the new painting department will fill one-fifth of the space presently used by the clock department and one-fourth of the space 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 experses to the profit centers 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 mirron departments to increase by 8%. No changes for those departments gross profit percentages or their direct expenses except for store supplies used. which will increase in proportion to soles
