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	$	175,000		$	77,500		$	252,500
Cost of goods sold		85,750			48,050			133,800
Gross profit		89,250			29,450			118,700
Direct expenses
Sales salaries		20,450			7,000			27,450
Advertising		1,290			725			2,015
Store supplies used		1,125			625			1,750
Depreciation—Equipment		1,590			525			2,115
Total direct expenses		24,455			8,875			33,330
Allocated expenses
Rent expense		7,020			3,780			10,800
Utilities expense		5,525			2,975			8,500
Share of office department expenses		10,500			4,500			15,000
Total allocated expenses		23,045			11,255			34,300
Total expenses		47,500			20,130			67,630
Net income	$	41,750		$	9,320		$	51,070

Williams plans to open a third department in January 2020 that will sell paintings. Management predicts that the new department will generate $63,500 in sales with a 55% gross profit margin and will require the following direct expenses: sales salaries, $8,450; advertising, $1,025; store supplies, $725; and equipment depreciation, $425. 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 utility 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 $16,000. 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 the nearest whole dollar amount.)

Answer rating: 100% (QA)

The correct ... View the full answer