Sauls Company's management is trying to decide whether to eliminate Department Z, which has produced low profits or losses for several years. The company's 2014 departmental income statement shows the following

.

- In analyzing whether to eliminate Department Z, management considers the following items:

A.The company has one office worker who earns $ 250 per week or $ 13,000 per year and four salesclerks who each earn $ 225 per week or $ 11,700 per year.

B.The full salaries of three salesclerks are charged to Department A. The full salary of one salesclerk is charged to Department Z.

C.Eliminating Department Z would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the two remaining clerks if the one office worker works in sales half-time. Eliminating Department Z will allow this shift of duties. If this change is implemented, half the office worker's salary would be reported as sales salaries and half would be reported as office salary.

D.The store building is rented under a long-term lease that cannot be changed. Therefore, Department A will use the space and equipment currently used by Department Z.

E.Closing Department Z will eliminate its expenses for advertising, bad debts, and store supplies; 65% of the insurance expense allocated to it to cover its merchandise inventory; and 30% of the miscellaneous office expenses presently allocated to it.

PLEASE ANSWER BOTH! :

1. Prepare a three-column report that lists items and amounts for (a) the company's total expenses (including cost of goods sold)in column 1, (b) the expenses that would be eliminated by closing Department Zin column 2, and (c) the expenses that will continuein column 3.

2.Prepare a forecasted annual income statement for the company reflecting the elimination of Department Z assuming that it will not affect Department A's sales and gross profit. The statement should reflect the reassignment of the office worker to one-half time as a salesclerk.

Sales Cost of goods sold Gross profit Operating expenses Advertising Store supplies used Depreciation store Total direct expense Allocated expenses Sales salaries Rent expense Bad debts Office salary nsurance expense iscellaneous office expense Total allocated expense Total expenses Net income Saul Company Departmental Income Statement For year ended December 31, 2014 en $437,500 $350,000 $87,500 230,650 293.200 62.550 24,950 144,300 119,350 13,500 15,000 1,500 2,800 700 3,500 7.00 50 10.50 29,000 23,300 5,700 46,800 35,100 11,700 13,800 11,040 2,760 10,500 2,000 12,500 10,400 13,000 2,600 2,100 700 2,800 25 2,1 21010 01000 69.990 3.290 26.71 120,000 24,300 26.060