Elegant becor Company\'s management is trying to decide whether to eliminate Dep

Question

Elegant becor 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 2013 departmental income statement shows the following For Year Ended 31, 2013 Sales Cost of goods sold $ 437,000 265,000 286,000 214,000 723,000 479,000 Gross profit 172,00072,000 244,000 Direct expenses Advertising Store supplies used Depreciation-Store equipment 6,000 4,500 4,600 12,500 4,200 3,500 28,500 8,700 8,100 Total direct expenses 25,100 20,200 45,300 Allocated expenses Sales salaries Rent expense Bad debts expense Office salary Insurance expense 78,000 9,460 9,400 18,720 2,100 2,000 46,800 124,800 14,190 6,600 31,200 3,500 4,730 7.200 1,400 1300 12,480 Miscellaneous office expenses 3,300 193,590 238,890 Total allocated expenses 119,680 73.910 Total expenses 144,780 94.110 Net income (loss) s 27.220 (22,10) $ 5,110 In analyzing whether to a. The company has one office worker b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is who earns $600 per week, or $31,200 per year, and four sales clerks who each earm $600 per week, or $31.200 per year for each salesclerk charged to Department 200. The salary of the divided evenly between the two departments fourth clerk, who works half-time in both departments, is SAMSU

Explanation / Answer

Required 1:

Elegant Decor Company

Analysis of Expense under Elemination of Department 200

Insurance Expense

TOTAL EXPENSES $ ELIMINATED EXPENSES $ CONTINUING EXPENSES $ Cost of Goods Sold 479000 214000 265000 DIRECT EXPENSES Advertising 28500 12500 16000 Store Supplies 8700 4200 4500 Depreciation-Stores 8100 - 8100 45300 16700 28600 ALLOCATED EXPENSES Sales Salaries 124800 46800 78000 Rent Expenses 14190 - 14190 Bad Debt Expenses 16600 7200 9400 Office Salary 31200 15600 15600

Insurance Expense

3500 994 2506 Misllaneous Expense 3300 286 3014 193590 70880 122710 Total Expenses $238890 $87580 $151310

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