[The following information applies to the questions displayed below.] Elegant Decor Company's management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The company's departmental income statements show the following. ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2019 Dept. 100 Dept. 200 Sales Cost of goods sold Gross profit $449,000 261,000 188,000 Combined $287,000 $736,000 209,000 470,000 78,000 266,000 Operating expenses Direct expenses Advertising 15,500 12,000 27,500 Store supplies used 4,000 3,600 7,600 Depreciation-Store 4,200 2,600 6,800 equipment Total direct 23,700 18,200 41,900 expenses Allocated expenses Sales salaries 52,000 31,200 83,200 Rent expense 9,500 4,770 14,270 Bad debts expense 9,700 7,800 17,500 Office salary 15,600 10,400 26,000 Insurance expense 2,300 1,400 3,700 Miscellaneous office 2,300 1,600 3,900 expenses Total allocated 91,400 57,170 148,570 expenses Total expenses 115,100 75,370 190,470 Net income (loss) $ 72,900 $ 2,630 $ 70,270 In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $500 per week, or $26,000 per year, and four salesclerks who each earns $400 per week, or $20,800 per year for each salesclerk. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. c. Eliminating Department 200 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 other two clerks if the one office worker works in sales half-time. Eliminating Department 200 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 100 will use the space and equipment currently used by Department 200. e. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 70% of the insurance expense allocated to it to cover its merchandise inventory; and 21% of the miscellaneous office expenses presently allocated to it.