Question
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
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 $ 115,000 $ 265,000 Cost of goods sold 73,500 71,300 144,800 Gross profit 76,500 43,700 120,200 Direct expenses Sales salaries 21,500 8,700 30,200 Advertising 2,100 800 2,900 Store supplies used 1,000 350 1,350 DepreciationEquipment 2,500 200 2,700 Total direct expenses 27,100 10,050 37,150 Allocated expenses Rent expense 7,040 4,020 11,060 Utilities expense 2,300 1,900 4,200 Share of office department expenses 13,000 9,500 22,500 Total allocated expenses 22,340 15,420 37,760 Total expenses 49,440 25,470 74,910 Net income $ 27,060 $ 18,230 $ 45,290 Williams plans to open a third department in January 2020 that will sell paintings. Management predicts that the new department will generate $55,000 in sales with a 75% gross profit margin and will require the following direct expenses: sales salaries, $6,500; advertising, $700; store supplies, $500; and equipment depreciation, $800. 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 $7,200. Since the Painting department will bring new customers into the store, management expects sales in both the Clock and Mirror departments to increase by 6%. 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 companys 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 Paintings Combined 0 0 0 Direct expenses 0 0 0 Total direct expenses Allocated expenses Total allocated expenses Total expenses 000 000 0 $ 0 $ 0 $ $ WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2020 Clock Mirror Paintings Combined 0 0 0 Direct expenses 0 0 0 Total direct expenses Allocated expenses Total allocated expenses Total expenses 000 000 0 $ 0 $ 0 $ $Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started