Elegant Decor Company's management is trying to decide whether to eliminate Department 200, which has produced...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Elegant Decor Company's management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The company's departmental income statements show the following. ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2019 Dept. 100 $450,000 265,000 Dept. 200 $281,000 Combined $731,000 Sales 207,000 472,000 Cost of goods sold. Gross profit 185,000 74,000 259,000 Operating expenses Direct expenses Advertising 18,000 13,500 31,500 Store supplies used 5,500 5,100 10,600 Depreciation-Store equipment 4,800 3,300 8,100 Total direct expenses 28,300 21,900 50,200 Allocated expenses 65,000 39,000 104,000 Sales salaries Rent expense 9,450 4,770 14,220 9,600 7,600 17,200 Bad debts expense Office salary 21,840 14,560 36,400 Insurance expense 2,500 1,700 4,200 3,500 Miscellaneous office expenses 2,100 1,400 Total allocated expenses 110,490 69,030 179,520 229,720 138,790 90,930 $ 46,210 $(16,930) $ 29,280 Total expenses Net income (loss) In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $700 per week, or $36,400 per year, and four salesclerks who each earns $500 per week, or $26,000 per year for each salesclerk. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. c. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office worker's salary would be reported as sales salaries and half would be reported as office salary. d. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200. e. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 73% of the insurance expense allocated to it to cover its merchandise inventory; and 19% of the miscellaneous office expenses presently allocated to it. 1. Complete the following report showing total expenses, expenses that would be eliminated by closing Department 200 and the expenses that would continue. The statement should reflect the reassignment of the office worker to one-half time as salesclerk. ELEGANT DECOR COMPANY Analysis of Expenses under Elimination of Department 200 Total Eliminated Continuing Expenses Expenses Expenses Direct expenses Allocated expenses $ 0 4 Total expenses 0 0 $ as a salesclerk. ELEGANT DECOR COMPANY Forecasted Annual Income Statement Under Plan to Eliminate Department 200 Operating expenses Total operating expenses $ 0 0 0 Elegant Decor Company's management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The company's departmental income statements show the following. ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2019 Dept. 100 $450,000 265,000 Dept. 200 $281,000 Combined $731,000 Sales 207,000 472,000 Cost of goods sold. Gross profit 185,000 74,000 259,000 Operating expenses Direct expenses Advertising 18,000 13,500 31,500 Store supplies used 5,500 5,100 10,600 Depreciation-Store equipment 4,800 3,300 8,100 Total direct expenses 28,300 21,900 50,200 Allocated expenses 65,000 39,000 104,000 Sales salaries Rent expense 9,450 4,770 14,220 9,600 7,600 17,200 Bad debts expense Office salary 21,840 14,560 36,400 Insurance expense 2,500 1,700 4,200 3,500 Miscellaneous office expenses 2,100 1,400 Total allocated expenses 110,490 69,030 179,520 229,720 138,790 90,930 $ 46,210 $(16,930) $ 29,280 Total expenses Net income (loss) In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $700 per week, or $36,400 per year, and four salesclerks who each earns $500 per week, or $26,000 per year for each salesclerk. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. c. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office worker's salary would be reported as sales salaries and half would be reported as office salary. d. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200. e. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 73% of the insurance expense allocated to it to cover its merchandise inventory; and 19% of the miscellaneous office expenses presently allocated to it. 1. Complete the following report showing total expenses, expenses that would be eliminated by closing Department 200 and the expenses that would continue. The statement should reflect the reassignment of the office worker to one-half time as salesclerk. ELEGANT DECOR COMPANY Analysis of Expenses under Elimination of Department 200 Total Eliminated Continuing Expenses Expenses Expenses Direct expenses Allocated expenses $ 0 4 Total expenses 0 0 $ as a salesclerk. ELEGANT DECOR COMPANY Forecasted Annual Income Statement Under Plan to Eliminate Department 200 Operating expenses Total operating expenses $ 0 0 0
Expert Answer:
Answer rating: 100% (QA)
Elegant Decor Company Total Expenses Eliminated Expenses Continuing Expenses Particulars ... View the full answer
Related Book For
Fundamental accounting principle
ISBN: 978-0078025587
21st edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
Posted Date:
Students also viewed these accounting questions
-
Elegant Decor Companys management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The companys 2013 departmental income statement...
-
Eclectic Decor Companys management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The companys 2009 departmental income statement...
-
answer the following questions about the countries below using CIA factbook Economic Systems Continuum Activity: Country Information Cards Answer the following questions about the countries below...
-
At the beginning of a fiscal year, Alexander Company buys a machine for $ 48,000. The machine has an estimated life of five years and an estimated salvage value of $ 4,000. Required Using the...
-
a. Identify the functions local extreme values in the given domain, and say where they occur. b. Which of the extreme values, if any, are absolute? c. Support your findings with a graphing calculator...
-
Fill in the Blank. Machine errors can cause ____________ in rotating machines.
-
The ledger of Waite Corporation at December 31, 2017, after the books have been closed, contains the following stockholders' equity accounts. Preferred Stock (10,000 shares issued)...
-
Analyze the implications of non-volatile memory (NVM) and persistent memory on traditional memory management practices. How do these technologies change the landscape of data persistence and recovery...
-
Read the case XYZ Company: An Integrated Capital Budgeting Instructional Case and answer the following question: Should the replacement asset be purchased? That is, does it make economic (financial)...
-
Discuss (examine, analyze, pros-cons) the CHALLENGES and ISSUES of hiring creative and innovative employees.
-
The goal of the project assessment is to determine how the organization can better handle the problem of imitators and counterfeiters. The organization should consider the following areas when...
-
Consider the following packaging options for a beverage company. The selling prices, package sizes, and ecological impacts are provided in the table. Selling Price per package Package...
-
The problem related to IoT data and lifecycle of parts. IoT data is pulled from functioning devices and can contain meta data. With this in mind, IoT provides an avenue for Embedded Intelligence to...
-
Freight transport operations have become complex and differentiated over the past few decades. Beyond shipping and handling goods, they often include operations such as the treatment of information...
-
You are the physician-owner of a group practice of five-physicians; the other four doctors are employees of the practice. You have decided to become more aggressive about growing the organization by...
-
Assume you invest $6,700 today in an investment that promises to return $20,809 in exactly 10 years. a. Use the present-value technique to estimate the IRR on this investment. b. If a minimum...
-
The electric field due to a line charge is given by where l is a constant. Show that E is solenoidal. Show that it is also conservative. E =
-
The following six-column table for Solutions Co. includes the unadjusted trial balance as of December 31, 2013. Required 1. Complete the six-column table by entering adjustments that reflect the...
-
Chavez Company most recently reconciled its bank statement and book balances of cash on August 31 and it reported two checks outstanding, No. 5888 for $ 1,028.05 and No. 5893 for $ 494.25. The...
-
Prepare journal entries to record the following selected transactions of Ridge Company. Mar. 21 Accepted a $ 9,500, 180- day, 8% note dated March 21 from Tamara Jackson in granting a time extension...
-
The City of Central Falls has engaged Robert Cohen, CPA to audit the June 30, 1999 financial statements of the City's Water Department under the GAO's Government Auditing Standards. Cohen's report...
-
Wil Stevens is executive vice president of a major automobile manufacturing company. Stevens was recently elected Mayor of Detroit. Prior to assuming office, he calls on you, his independent auditor,...
-
A public accounting firm has been engaged to perform the audit of a local, federally funded Housing Allowance Program. The objective of the program is to increase the housing standards of Agana...
Study smarter with the SolutionInn App