Williams Company began operations in January 2017 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, 2017 Clock Mirror Combined Sales $ 220,000 $105,000 $325,000 Cost of goods sold 107,800 65,100 172,900 Gross profit 112,200 39,900 152,100 Direct expenses Sales salaries 21,000 7,900 28,900 Advertising 1,100 700 1,800 Store supplies used 550 300 850 Depreciation-Equipment 1,800 600 2,400 Total direct expenses 24,450 9,500 33,950 Allocated expenses Rent expense 7,090 3,660 10,750 Utilities expense 2,700 1,400 4,100 Share of office department expenses 12,500 10,500 23,000 Total allocated expenses 22,290 15,560 37,850 Total expenses 46,740 25,060 71,800 Net income 65.460 $ 14,840 $ 80,300 Williams plans to open a third department in January 2018 that will sell paintings. Management predicts that the new department will generate $56,000 in sales with a 95% gross profit margin and will require the following direct expenses: sales salaries, $7,000; advertising, $1,000; store supplies, $800; and equipment depreciation, $1,000. 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 occupied 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 $8,300. Since the painting department will bring new customers into the store, management expects sales in both the clock and mirror departments to increase by 8%. 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 Clock Mirror Paintings $ 220,000 $ 105,000 $ 56,000 Combined Sales Cost of goods sold Gross profit 220,000 105,000 56,000 Direct expenses Sales salaries Advertising Store supplies used Depreciation of equipment Total direct expenses Allocated expenses Rent expense Utilities expense Share of office dept. expenses Total allocated expenses Total expenses Net income $ 220,000 $ 105,000 $ 56,000 $
