Paper Inc. has three departments: printing, supplies, and cards. Certain information about the revenues and expenses of the departments for the year ending December 31, 2016, is given below. Indirect expenses have been allocated on bases similar to those discussed and illustrated in the text:

INSTRUCTIONS
1. Prepare a departmental income statement showing the contribution margin and the net profit for each department.
2. Based solely on accounting information, would you recommend that any departments be closed? Explain.
3. What information, other than accounting data, would you suggest the owners consider in deciding whether to close any departments?
Analyze:
What increase in gross profit would be required to ensure that the Supplies Department would be able to cover its indirect expenses? Assume that all other figures remained steady.

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Printing Supplies Cards Total Allocated Indirecd Expenses Beginning Merchandise Inventory Direct Expenses Ending Merchandise Inventory Purchases Purchases Returns and Allowances Sales Sales Returns and Allowances S 6,000 5,000 25,000 4,500 30,500 500 96,900 900 S 3,000 4,200 12,000 2,900 34,000 300 44,250 250 S 1,000 S 10,000 11,000 47,000 8,400 7,500 82,000 1,100 30,200 171,350 1,350 1,800 10,000 1,000 300 200