question below Question 4 > Elegant Department Store is a large local retail store which has three
Fantastic news! We've Found the answer you've been seeking!
Question:
question below
Transcribed Image Text:
Question 4 > Elegant Department Store is a large local retail store which has three departments. The income statement in Year X reporting the performance of the three departments was extracted as follows: - Department Sales Costs Profit/(Loss) A B C Total $ $ S $ 820,000 750,000 1,430,000 3,000,000 628,200 760,500 1,222,800 2,611,500 191,800 (10,500) 207,200 388,500 The company's management is concerned at the performance of department B. The following alternatives are being considered: > I. To close department B and to turn the space into an additional storage area for the goods sold in department C. It is forecast that greater access to stock for immediate delivery would increase the sales of department C by 10%. The sales staff of department B would be made redundant. - II. To refurbish department B at a cost of $24,000. The department would be closed for 2 months while refurbishment took place but the sales would be retained. Sales in a full year are expected to be 15% higher from the refurbished department. III. To close department B, and to allocate its space, 50% to department A and 50% to department C, so increasing sales in those departments by 15% and 20% respectively. Higher purchase quantities leading to lower prices from suppliers would increase the gross margin in each department by 1%. With this alternative, 65% of the sales staff in department B (by cost) would be made redundant. The remainder would be transferred 50% to department A and 50% to department C. - Other information: > (i) Gross profit margins in Year X were 60%, 40%, and 45% for departments A, B, and C respectively. (ii) General fixed costs for Year X, amounting to $630,000 have been apportioned to departments on a basis of sales in the income statement. - (iii) The costs for the sales staff in departments A, B, and C are $128,000, $153,000 and $136,000 respectively. (iv) Sales are made evenly over the year. Required: - Evaluate each of the alternatives proposed by the management of Elegant Department Store and make recommendations to the management for decision. (20 marks) - Question 4 > Elegant Department Store is a large local retail store which has three departments. The income statement in Year X reporting the performance of the three departments was extracted as follows: - Department Sales Costs Profit/(Loss) A B C Total $ $ S $ 820,000 750,000 1,430,000 3,000,000 628,200 760,500 1,222,800 2,611,500 191,800 (10,500) 207,200 388,500 The company's management is concerned at the performance of department B. The following alternatives are being considered: > I. To close department B and to turn the space into an additional storage area for the goods sold in department C. It is forecast that greater access to stock for immediate delivery would increase the sales of department C by 10%. The sales staff of department B would be made redundant. - II. To refurbish department B at a cost of $24,000. The department would be closed for 2 months while refurbishment took place but the sales would be retained. Sales in a full year are expected to be 15% higher from the refurbished department. III. To close department B, and to allocate its space, 50% to department A and 50% to department C, so increasing sales in those departments by 15% and 20% respectively. Higher purchase quantities leading to lower prices from suppliers would increase the gross margin in each department by 1%. With this alternative, 65% of the sales staff in department B (by cost) would be made redundant. The remainder would be transferred 50% to department A and 50% to department C. - Other information: > (i) Gross profit margins in Year X were 60%, 40%, and 45% for departments A, B, and C respectively. (ii) General fixed costs for Year X, amounting to $630,000 have been apportioned to departments on a basis of sales in the income statement. - (iii) The costs for the sales staff in departments A, B, and C are $128,000, $153,000 and $136,000 respectively. (iv) Sales are made evenly over the year. Required: - Evaluate each of the alternatives proposed by the management of Elegant Department Store and make recommendations to the management for decision. (20 marks) -
Expert Answer:
Answer rating: 100% (QA)
To evaluate the proposed alternatives and make recommendations I will analyze the financial impact of each option Alternative I Close department B and ... View the full answer
Related Book For
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
Posted Date:
Students also viewed these accounting questions
-
Question: What as the average weekly safety inventory level of refined sugar from the beginning January 2022 to the end of July 2022? A. 512,465.9691 metric tons per week B. 316,002.1474 metric tons...
-
An individual has capital losses brought forward from previous years amounting to 4,800. Compute the individual's taxable gains for 2020-21 if total gains and losses for the year are as follows:...
-
Shawnees Boat Club has never maintained a petty cash fund. The owner has decided that the club should have some funds available for small purchases. On May 1, a cheque for $200 was issued to...
-
A solution of \(13.5 \%\) by weight of polyisoprene has the following power-law parameters: \(\Lambda=5000 \mathrm{~Pa} \cdot \mathrm{s}^{n}\) and \(n=0.2\). Consider the flow of such a solution in a...
-
The C-P partnership has the following capital account balances on January 1, 2011: Com is allocated 60 percent of all profits and losses with the remaining 40 percent assigned to Pack after interest...
-
On March 1 of the current year, the following accounts and their balances appear in the ledger of Mocha Corp., a coffee processor: Preferred 2% Stock, $25 par (300,000 shares authorized, 120,000...
-
Kent Company\'s accountant is preparing its June bank reconciliation and has collected the following data: Per Books Per Bank June 1 Balance $11,600 $10,000 June Deposits 24,600 21,200 June Checks...
-
Use Figure: Efficiency and Pollution. Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society. An optimal Pigouvian tax of pollution can...
-
Opinion on what are the future challenges and client expectations The Internal Audit Profession in North America, What are Internal Audit Function, what is the future and expectation of them in North...
-
Temporary Current Assets $302,300 Permanent Current Assets $602,300 Fixed Assets $402,300 Total Assets $1,306,900 Plan-conservative Total Assets % of Total Dollars x Interest Rate = Interest Expense...
-
Based upon these amounts, what is total stockholders' equity at the end of the current year? Beginning balance in retained earnings: $34,569 Net income during the year of $15,960 Dividends declared...
-
Description of kids toy that will be supported with marketing activities(product) What pricing strategy will be employed for kids toys during the marketing period and why? (Price) Describe the...
-
Why evaluate the effectiveness of marketing strategies and why do companies evaluate their marketing performance? Performance related to Marketing activities performed by which marketing intern. ?
-
The expenses and income of an individual are given in table form to the right. Find the net monthly cash flow (it could be positive or negative). Assume salaries and wages are after taxes. When you...
-
Provide a few individual examples who revealed what aspects of emotional intelligence?
-
Computer Medic Limited issues \($800,000\) of 9.5% bonds on 1 July 20X1. Additional information on the bond issue is as follows: Required: 1. Record the bond issue and the first interest payment...
-
On I June 20X5, Bridle Corp. issued \($40,000,000\) of 7.5% bonds, with interest paid semi-annually on 30 April and 31 October. The bonds were originally dated 1 November 20X4, and were 15-year...
-
Batra Company sold \($1,500,000\) of five-year, 12% bonds on 1 August 20X2. Additional information on the bond issue is as follows: Required: 1. Record the bond issuance on 1 August 20X2. 2. Prepare...
Study smarter with the SolutionInn App