Elegant Decor Company’s management is trying to decide whether to eliminate Department 200, which…

Elegant Decor 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 2017 departmental income statements show the following. ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2017 Dept. 100 Dept. 200 Combined Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $436,000 $290,000 $726,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,000 207,000 469,000 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,000 83,000 257,000 Operating expenses Direct expenses Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 12,000 29,000 Store supplies used . . . . . . . . . . . . . . . . . . . . . . . 4,000 3,800 7,800 Depreciation—Store equipment . . . . . . . . . . . . . 5,000 3,300 8,300 Total direct expenses . . . . . . . . . . . . . . . . . . . . . . 26,000 19,100 45,100 Allocated expenses Sales salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 39,000 104,000 Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,440 4,720 14,160 Bad debts expense . . . . . . . . . . . . . . . . . . . . . . . 9,900 8,100 18,000 Office salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,720 12,480 31,200 Insurance expense . . . . . . . . . . . . . . . . . . . . . . . 2,000 1,100 3,100 Miscellaneous office expenses . . . . . . . . . . . . . 2,400 1,600 4,000 Total allocated expenses . . . . . . . . . . . . . . . . . . . 107,460 67,000 174,460 Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,460 86,100 219,560 Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,540 $ (3,100) $ 37,440 In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $600 per week, or $31,200 per year, and four salesclerks who each earns $500 per week, or $26,000 per year for each salesclerk. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. c. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office worker’s salary would be reported as sales salaries and half would be reported as office salary. d. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200. e. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 70% of the insurance expense allocated to it to cover its merchandise inventory; and 25% of the miscellneous office expenses presently allocated to it. Required 1. Prepare a three-column report that lists items and amounts for (a) the company’s total expenses (including cost of goods sold)—in column 1, (b) the expenses that would be eliminated by closing Department 200—in column 2, and (c) the expenses that will continue—in column 3. 2. Prepare a forecasted annual income statement for the company reflecting the elimination of Department 200 assuming that it will not affect Department 100’s sales and gross profit. The statement should reflect the reassignment of the office worker to one-half time as a salesclerk. Analysis Component 3. Reconcile the company’s combined net income with the forecasted net income assuming that Department 200 is eliminated (list both items and amounts). Analyze the reconciliation and explain why you think the department should or should not be eliminated.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
error: Content is protected !!