met can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing The Vice President of a telecommunications company thinks that Department A needs to be eliminated as it is affecting the entire organization. You have been assigned the job of determining if Department A should be eliminated or not and informing the President. The following information has been gathered to assist you in making this decision Income Statement For the Quarter Ended December 31, 2020 Department Total A B C Sales $1,500,000 $280,000 $700,000 $520,000 less. Variable Costs 903.600 156,000 435,600 312.000 Contribution Margin $596,400 124,000 264,400 208,000 Less fixed expenses Direct advertising 97,500 26.000 40,000 31.500 General company advertising 30,000 5.600 14,000 10,400 Salaries 136,000 36,000 58,000 42.000 Rent on building 76,500 19,000 31,500 26,000 Utilities 30,900 8,000 13,600 9,300 Depreciation of fixtures 40,000 10.800 16,300 12,900 Insurance on inventory and fixtures 3,700 1,200 1,400 1,100 General office expenses 60,000 20,000 20,000 20,000 Service department allocations 45,000 15.000 15,000 15.000 Total fixed expenses 519,600 141 600 209.800 168,200 Operating income doss) $76,800 ($17.600) $54,600 $39,800 Allaratat handles Allers ou Sign Layout References Mailings Review View Help The Internet can contain vituses. Unless you need to edit, it's safer to stay in Protected View Enable Editing Allocated based on sales dollars ** Allocated based on space occupied The following information is also necessary to assist you in your decision 1 One of the part-time salaried employees in Department A has been with the company for many years. If Department A is eliminated, she will be transferred to another department with a salary of $4,000 per quarter. All other employees will be laid off 2 All departments are housed in the same building. The store leases the entire building at a fixed annual rental rate and rent expenses are allocated based on space occupied. 3. If Department A is eliminated the utilities bill will be reduced by about $7,000 per quarter 4 If Department A is eliminated the fixtures in the department will be transferred to the other departments 5 25% of the insurance in Department A relates to the fixtures in the department, the remainder relates to the department's merchandise inventory 6 anaran enorcar elle chans that relatathland Focus o 99. Design Layout References Mailings Review View om the Internet can contain viruses. Unless you need to edit it's safe to stay in Protected View Enable Editing 4 If Department A is eliminated the fixtures in the department will be transferred to the other departments 5 25% of the insurance in Department A relates to the fixtures in the department, the reader relates to the department's merchandise inventory 6 General office expenses will not change as they relate to the head office. 7 The company has two service departments purchasing and watchouse. If Department A is eliminated the company can lay off one full-time and one part-time person from these departments. The combined salaries and other employee costs of these employees are $5,300 per quarter REQUIRED: Assume the company has no alternative use for the space now being occupied by Department A Prepare a schedule to show whether or not the department should be eliminated. (Assume that eliminating Department A will have no effect on the other departments) (16 marks) b. Assume that the space being occupied by Department A is quite valuable and could be subleased at a rental rate of $60,000 per quarter. Would you advise the company to eliminate Department A and sablease the space? (3 marks) c. What is one qualitative factor that should be considered with this type of decision? (1 mark) Focus o 8 9