[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. Dept. 200 $287,000 207,000 80,000 Combined $735,000 470,000 265,000 ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2019 Dept. 100 Sales $448,000 Cost of goods sold 263,000 Gross profit 185,000 Operating expenses Direct expenses Advertising 16,500 Store supplies used 4,500 Depreciation-store equipment 4,800 Total direct expenses 25,800 Allocated expenses Sales salaries 65,000 Rent expense 9,440 Bad debts expense 9,600 office salary 15,600 Insurance expense 1,700 Miscellaneous office expenses 2,400 Total allocated expenses 103,740 Total expenses 129,540 Net income (loss) $ 55,460 12,500 4,100 3,200 19,800 29,000 8,600 8,000 45,600 39,000 4,720 7,700 10,400 1,000 1,800 64,620 84,420 $ (4,420) 104,000 14,160 17,300 26,000 2,700 4,200 168,360 213,960 $ 51,040 In analyzing whether to eliminate Department 200, management considers the following: 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 $500 per week, or $26,000 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; 72% of the insurance expense allocated to it to cover its merchandise inventory, and 22% of the miscellaneous office expenses presently allocated to it. 2. Prepare a forecasted annual income statement for the company reflecting the elimination of Department 200 assuming that it will not affect Department 100's sales and gross profit. The statement should reflect the reassignment of the office worker to one-half time as a salesclerk. ELEGANT DECOR COMPANY Forecasted Annual Income Statement Under Plan to Eliminate Department 200 0 Operating expenses Total operating expenses 0 3. Should Department 200 be eliminated? Should Department 200 be eliminated