Sales Cost of goods sold Gross profit Direct expenses Clock Mirror Combined S150,000 $105,000 255, 000 73,500 65,100 138,600 76,500 39,900 116, 400 Sales salaries Advertising Store supplies used Depreciation-Equipment Total direct expenses 20,000 1,100 900 2,200 24,200 8,100 28,100 1,600 1,450 2,800 33,950 500 550 600 9,750 Allocated expenses Rent expense Utilities expense Share of office department expenses Total allocated expenses 4,020 11,100 4,300 19,000 34,400 68,350 S 29,720 18,330 48,050 7,080 3,000 12, 500 1,300 6, 500 11,820 21,570 Total expenses 46, 780 Net income Williams plans to open a third department in January 2018 that will sell paintings. Management predicts that the new department will generate $48,000 in sales with a 45% gross profit margin and will require the following direct expenses: sales salaries, $7,000 advertising, $700; store supplies, $1,000; 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 (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 $7,500. Since the painting department will bring new customers into the store management expects sales in both the clock and mirror departments to increase by 14%. No changes for those departments' gross profit percents or their direct expenses are expected except for store supplies used, which will increase in proportion to sales WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2018 Clock Mirror Paintings Combined Sales Cost of goods sold Gross profit Direct expenses 48,000$ 21,600 26,400 150,000 S 105,000 $ 73,500 76,500 65,100 39,900 303,000 160,200 142,800 Sales salaries Advertising Store supplies us Depreciation of equipment Total direct expenses 20,000 1,100 900 200 22,200 8,100 500 550 600 9,750 7,000 700 1,000 400 9,100 35.100 2,300 2,450 1,200 41,050 ed Allocated expenses Rent expense Utilities expense Share of office dept. expenses Total allocated expenses 7,080 3,000 12,500 22,580 44,780 4,020 1,300 6,500 11,820 21,570 11,100 4,300 26,500 41,900 82,950 59,850 7,500 7,500 16,600 Total expenses et income 31,720$ 18,330 $ 9,8009$