Daisy Supermarket operates four departments. Management is concerned about the financial results of the dried goods department, which has shown a loss for the past 3 years according to the company’s income statement. Competition in dried goods is exceptionally strong in the area in which the company operates. The departmental income statement for the year ended 30 June 2020 was as follows:

If the dried goods department is closed, direct expenses amounting to $13 000 would be shifted to the other three departments. In addition, indirect expenses of $3700 are unavoidable if the department is eliminated.
Required

(a) Calculate the departmental margin for the dried goods department.

(b) Should the dried goods department be closed down? Justify your answer.

(c) Prepare an income statement for the three remaining departments, assuming the dried goods department is dropped, to confirm your results in requirement (b).

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INCOME Sales Less: Cost of sales GROSS PROFIT Direct expenses Indirect expenses PROFIT (LOSS) DAISY SUPERMARKET Income Statement for the year ended 30 June 2020 Dried goods department $ 375800 280 800 95 000 (143800) (20 500) $ (69300) All other departments $1 865 000 1118700 746300 (292 700) (246 300) $ 207 300