Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedimage text in transcribed

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 $ 230,000 $115,000 $ 345,000 Cost of goods sold 112,700 71,300 184,000 Gross profit 117,300 43,700 161,000 Direct expenses Sales salaries 19,500 8,400 27,900 Advertising 1,800 800 2,600 Store supplies used 1,050 450 1,500 Depreciation-Equipment 2,500 400 2,900 Total direct expenses 24,850 10,050 34,900 Allocated expenses Rent expense 7,060 3,900 10,960 Utilities expense 2,400 2,200 4,600 Share of office department expenses 12,000 4,000 16,000 Total allocated expenses 21,460 10, 100 31,560 Total expenses 46,310 20,150 66,460 Net income $ 70,990 $ 23,550 $ 94,540 Williams plans to open a third department in January 2020 that will sell paintings. Management predicts that the new department will generate $46,000 in sales with a 75% gross profit margin and will require the following direct expenses: sales salaries, $7,500; advertising, $1,000; store supplies, $600; and equipment depreciation, $400. 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 $7,800. Since the Painting department will bring new customers into the store, management expects sales in both the Clock and Mirror departments to increase by 14%. 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 Paintings Combined Direct expenses Total direct expenses Allocated expenses Total allocated expenses Total expenses

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Principles And Practice Of Auditing

Authors: George Puttick, Sandra Van Esch

8th Edition

0702156914, 978-0702156915

More Books

Students also viewed these Accounting questions

Question

Are there any questions that you want to ask?

Answered: 1 week ago