Willams Company began operations in January 2019 with two operating (selling) departments and one service (office) department. Its departmental income statements follow. WILLIAMS COMPANY Departmental Income Statements For Year Ended December 31, 2019 Clock Mirror Sales Combined $ 130,000 $ 55,000 $ 185,000 Cost of goods sold 63,700 34,100 Gross profit 97.800 66,300 20,900 87.280 Direct expenses Sales salaries 20,000 7.000 27,000 Advertising 1,200 1,700 Store supplies used 900 Depreciation Equipment 1,300 1,500 300 Total direct expenses 23,600 8,200 31,800 Allocated expenses Rent expense 7,020 3,780 10,800 Utilities expense 2,600 1,400 4,000 Share of office department expenses 10.500 4,500 15,000 Total allocated expenses 20.120 29,800 Total expenses 43, 720 17,880 61.600 Net income $ 22,580 5 3,020 $ 25,600 500 400 1.800 Williams plans to open a third department in January 2020 that will sell paintings Management predicts that the new department will generate $50,000 in sales with a 55% gross profit margin and will require the following direct expenses: sales salaries. $8,000 advertising, $800, store supplies. $500; and equipment depreciation, $200. It will fit the new department into the current rented space by taking some square footage from the other two departments. When opened the new Painting 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 their sales. It expects the Painting department to Increase total office department expenses by $7,000. Since the Painting department will be customers into the store Willams Company began operations in January 2019 with two operating (selling) departments and one service (office) department. Its departmental income statements follow. WILLIAMS COMPANY Departmental Income Statements For Year Ended December 31, 2019 Clock Mirror Sales Combined $ 130,000 $ 55,000 $ 185,000 Cost of goods sold 63,700 34,100 Gross profit 97.800 66,300 20,900 87.280 Direct expenses Sales salaries 20,000 7.000 27,000 Advertising 1,200 1,700 Store supplies used 900 Depreciation Equipment 1,300 1,500 300 Total direct expenses 23,600 8,200 31,800 Allocated expenses Rent expense 7,020 3,780 10,800 Utilities expense 2,600 1,400 4,000 Share of office department expenses 10.500 4,500 15,000 Total allocated expenses 20.120 29,800 Total expenses 43, 720 17,880 61.600 Net income $ 22,580 5 3,020 $ 25,600 500 400 1.800 Williams plans to open a third department in January 2020 that will sell paintings Management predicts that the new department will generate $50,000 in sales with a 55% gross profit margin and will require the following direct expenses: sales salaries. $8,000 advertising, $800, store supplies. $500; and equipment depreciation, $200. It will fit the new department into the current rented space by taking some square footage from the other two departments. When opened the new Painting 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 their sales. It expects the Painting department to Increase total office department expenses by $7,000. Since the Painting department will be customers into the store