Wilams Company began operations in January 2017 with two operating (selling) departments and one service (office) department. Its departmental Income statements follow WILLIAMS COMPANY Departnental Incone Statenents For Year Ended December 31, 2017 Clock Mirror Combined Sales 260,e08 $125,008 $385,008 77,50e 127,408 Cost of goods sold Gross profit 284,908 47,500 132,600 180, 100 Direct expenses Sales salaries Advertising Store supplies used Depreciation-Equipment Total direct expenses Allocated expenses Rent expernse Utilities expense Share of office departnent expenses Total allocated expenses Total expenses 22,008 8,488 30,480 2,608 1.800 808 500 300 888 2.300 300 2.600 26,600 36,400 9,800 3,846 1,708 5,50e 7,100 10.948 2.900 4.608 11,508 17,000 21,508 11,046 32,548 48.188 28,848 68.948 Net income 84,508 26,660 111,166 Willams plans to open a third department In January 2018 that will sell paintings. Management predicts that the new department will generate $58,000 In sales with a 45 % gross profit margin and will require the following direct expenses: sales salarles, $8.000: advertising, $1,100; store supplies, $400; and equlpment depreclation, $400. It wl fit the new department Into the current rented space by taking some square footage from the other two departments. When opened, the new palnting department will fill one-fifth of the space presently used by the clock department and one-fourth used by the mirror department. Management does not predict any Increase In utilities costs, which are allocated to the departments In proportion to occupled space (or rent expense). The company allocates office department expenses to the operating departments in proportion to thelr sales. It expects the palnting department to Increase total office department expenses by $8.400. Since the palnting department will bring new customers Into the store, management expects sales In both the clock and mirror departments to Increase by 7% No changes for those departments gross profit percents or their direct expenses are expected except for store supplies used, which will Increase In proportion to sales. Required: Prepare departmental Income statements that show the company's predicted results of operations for calendar-year 2018 for the three operating (selling) departments and their combined totals. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2018 Paintings 58,000 Combined Clock Mirror sees Cost of goods sold Gross profit 278,200 127.400 63.750 $ 309.950 150.800 63.750 58,000 309.950 Direct expenses Sales salaries Advertising Store supplies used Share of office dept. expenses Total direct expenses 0 Allocated expenses Total allocated expenses 0 Total expenses 0 0 0 0 150,800 58,000 309,950 63,750
