Niklos Boot Co. sells men\'s, women\'s, and chilldren\'s boots. For each type of

Question

Niklos Boot Co. sells men's, women's, and chilldren's boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men's department has a sales staff of nine employees, the manager of the women's department has six employees, and the manager of the children's department has three employees. All departments are housed in a single store. In recent years, the childrens department has operated at a net loss and is expected to continue to do so. Last year's income statements follow Depariment Department Deatment Cat af goods sold 4000)70 94,000 Net none oss Required at. Calculate the contribution to profit of the children's department. (Negative amount should be indicated by a minus sign.) +2 Should the children's department be eliminated? 1. Calculate the net income for the company as the whole with the children's department. (Negative amount should be indicated by a minus sign.) -. Prepare the income statement for the company as the whole without the children's department. (Sunk cost of Children's Department should be allocated equally between the remaining departments.)

Explanation / Answer

a-1) CONTRIBUTION OF CHILDREN'S DEPARTMENT TO PROFIT: Sales 230000 Cost of goods sold -106875 Gross margin 123125 Department managers' salary -41000 Sales commissions -37900 Contribution to profit 44225 Answer a-2) No, the Children's department should not be eliminated as it is contributing to the overall profit of the firm. b-1) NET INCOME OF THE COMPANY AS A WHOLE WITH THE CHILDREN'S DEPARTMENT: Men's department Women's department Children's department Total for the Company Sales 700000 500000 230000 1430000 Cost of goods sold -275500 -184400 -106875 -566775 Gross margin 424500 315600 123125 863225 Department managers' salary -72000 -61000 -41000 -174000 Sales commissions -126200 -95600 -37900 -259700 Rent on store lease -41000 -41000 -41000 -123000 Store utilities -24000 -24000 -24000 -72000 Net Income/(Loss) 161300 94000 -20775 234525 Net income of the company as a whole = 234525 Answer b-2) NET INCOME OF THE COMPANY AS A WHOLE WITHOUT THE CHILDREN'S DEPARTMENT: Men's department Women's department Total for the Company Sales 700000 500000 1200000 Cost of goods sold -275500 -184400 -459900 Gross margin 424500 315600 740100 Department managers' salary -72000 -61000 -133000 Sales commissions -126200 -95600 -221800 Rent on store lease -61500 -61500 -123000 Store utilities -36000 -36000 -72000 Net Income/(Loss) 128800 61500 190300

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.