Williams 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 Combined Sales $215,000 $ 97,500 $312,500 Cost of goods sold 105, 350 60,450 165,800 Gross profit 109, 650 37,050 146, 700 Direct expenses Sales salaries 20,850 7,000 27,850 Advertising 1,370 925 2,295 Store supplies used 1, 325 825 2,150 Depreciation-Equipment 1,670 725 2,395 Total direct expenses 25, 215 9,475 34,690 Allocated expenses Rent expense 7,020 3,780 10, 800 Utilities expense 8, 125 4,375 12,500 Share of office department expenses 10, 500 4,500 15,000 Total allocated expenses 25, 645 12,655 38,300 Total expenses 50, 860 22,130 72,990 Net income $ 58,790 $ 14,920 $ 73, 710 Williams plans to open a third department In January 2020 that will sell paintings. Management predicts that the new department will generate $75,500 in sales with a 55% gross profit margin and will require the following direct expenses: sales salaries, $8,850; advertising, $1,225; store supplies, $925, and equipment depreciation, $625. 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 $24,000. 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 2020 for the three operating (selling) departments and their combined totals. (Do not round Intermediate calculations. Round your final answers to nearest whole dollar amount.) Answer is complete but not entirely correct. WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2020 Clock Mirror Paintings Combined Sales $ 232,200 $ 105,300 $ 75,500 $ 413,000 Cost of goods sold 113,778 65,286 33,975 213,039 Gross profit 118,422 40,014 41,525 199,961 Direct expenses Sales salaries 22,518 7,560 8,850 38,928 Advertising 1,480 999 1,225 3,704 Store supplies used 1,431 891 925 3,247 Depreciation of equipment 1,804 783 625 3,212 Total direct expenses 27,233 10,233 11,625 49,091 Allocated expenses Rent expense 5,616 2,835 2,349 10,800 Utilities expense 6,500 3,281 2,719 12,500 Share of office dept. expenses 13,493 x 6,119 X 4,387 X 24,000 Total allocated expenses 25,609 12,235 9,455 47,300 Total expenses 52,842 22,468 21,080 96,391 Net income IS 65,580 $ 17,546 $ 20,445 $ 103,570 >
