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 $ 150,000 $ 95,000 $ 245,000 Cost of goods sold 73,500 58,900 132,400 Gross profit 76,500 36,100 112,600 Direct expenses Sales salaries 20,000 7,800 27,800 Advertising 1,600 500 2,100 Store supplies used 650 600 1,250 Depreciation-Equipment 2,200 500 2,700 Total direct expenses 24,450 9,400 33,850 Allocated expenses Rent expense 7,110 3,780 10,890 Utilities expense 2,600 1,500 4,100 Share of office department expenses 7,500 17,500 Total allocated expenses 19,710 12,780 32,490 Total expenses 44,160 22,180 66,340 Net income $ 32,340 $ 13,920 $ 46,260 Williams plans to open a third department in January 2020 that will sell paintings. Management predicts that the new department will generate $51,000 in sales with a 65% gross profit margin and will require the following direct expenses: sales salaries, $9,000; advertising, $1,100; store supplies, $900; and equipment depreciation, $600. 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 $7,700. Since the Painting department will bring new customers into the store, management expects sales in both the Clock and Mirror departments to increase by 9%. 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.) WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2020 Clock Mirror Combined Paintings $ 51,000 17,850 33,150 0 0 0 20,000 1,600 2,200 7,800 500 500 Sales Cost of goods sold Gross profit Direct expenses Sales salaries Advertising Depreciation of equipment Store supplies used Total direct expenses Allocated expenses Rent expense Utilities expense Share of office dept. expenses Total allocated expenses Total expenses Net income 9,000 1,100 600 900 11,600 23,800 8,800 0 0 23,800 (23,800) 0 8,800 (8,800) 0 11,600 21,550 $ $ $ $
