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 B C

Sales $$1,000,000$ $$500,000$ $$320,000$ $$180,000$

Variable expenses $574,300338,000166,00070,300$

Contribution margin $425,700162,000154,000109,700$

Fixed expenses

Salaries $49,00018,00016,00015,000$

Utilities $6,2002,6002,0001,600$

Direct advertising $89,00032,00027,00030,000$

General advertising $125,00012,5008,0004,500$

Rent on building $238,00016,00012,00010,000$

Employment taxes $34,9001,8001,6001,500$

Depreciation of fixtures $36,00012,00015,0009,000$

Insurance and property taxes

On inventory and fixtures $7,9002,3004,0001,600$

General office expenses $54,00018,00018,00018,000$

Service department expenses $81,00027,00027,00027,000$

$391,000142,200130,600118,200$

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 $$ purchasing and warehouse.. If Department C is eliminated, one employee in the warehouse can be discharged. This employee$$s salary is $$800$ per month. General office expenses will not change,

f$.$ The space being occupied by department C could be subleased at a rental rate of $$48,000$ per month.

g$.$ If department C is eliminated, the company expects department A$$s sales to increase by $10\%$ and department B$$s sales to decrease by $5\%.$

Required $$

Do you recommend the elimination of department C$.$ Use incremental analysis.