Sales have never been good in Department C of Simran's Department Stores, For this reason, management is considering the elimination of the department. A summarized income statement for the store, by departments, for the most recent month is given below: Department Total A Sales B $1,000,000 C $500,000 Variable expenses $320,000 574,300 $180,000 338,000 166,000 Contribution margin 425,700 70,300 162,000 154,000 Fixed expenses 109,700 Salaries 49,000 18,000 16,000 15,000 Utilities 6,200 2,600 2,000 1,600 Direct advertising 89,000 32,000 27,000 30,000 General advertising 1 25,000 12,500 8,000 4,500 Rent on building 2 38,000 16,000 12,000 10,000 Employment taxes 3 4,900 1,800 1,600 1,500 Depreciation of fixtures 36,000 12,000 15,000 9,000 Insurance and property taxes On inventory and fixtures 7,900 2,300 4,000 1,600 General office expenses 54,000 18,000 18,000 18,000 1 0 SENG 70) 9 12:15 AM Search N 12/14/2022 TravelMate |Pletri Service department expenses 81,000 27,000 27,000 27,000 391,000 142,200 130,600 118,200 Net income (loss) $34,700 $19,800 $23,400 -$8,500 1 Allocated on the basis of sales dollars 2 Allocated on the basis of space occupied 3 Based on salaries paid directly in each department The following additional information is available: a. If department C is eliminated, the utilities bill will be reduced by $700 per month. b. All departments are housed in the same building. The store leases the entire building at a fixed annual rental rate. c. One of the employees in department C is Fred Jones, who has been with the company for many years. Mr. Jones will be transferred to another department if Department C is eliminated. His salary is $1,000 per month, Transferring Mr. Jones to the other department will allow that department to avoid hiring an new employee that would have been paid $800 per month. d. The fixtures in department C would be transferred to the other departments if department C is eliminated. One-fourth of the insurance and property taxes in Department C relates to the fixtures of the department. e. The company has two service departments - purchasing and warehouse.. If Department C is eliminated, one employee in the warehouse can be dircharred This amolnunn's colon,ir tonn nor month General office nunnnear will not chanan 12:15 AM