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Login NationeX O National Ueiversity Syste XE Week html Check my work mode : This shows what is correct or incorrect for the work you have complete 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 C Departmentel Incone Statesents For Year Ended December 31, 2017 Dept. 10 436,000 $290,0 $726,880 Dept. 200 Seles Cost of goods sold Gross profit Operating expenses A469,800 83,009 174,000 257,8 Direct expenses 17,00 29,00e ,809 12,000 Advertising Store suppiles used Depreciatlon-Store equipment Total direct expenses 26,000 19,189 Allocated expensers Sales salaries Rent expense 65,009 ,440 39,000 104,000 8,100 12,489 1,188 office salary 18,728 31,200 Insurance expense Miscellaneous office expenses 107,4607. 174,400 133 48610 219 56e s 40,540(3,10) 37,440 Total allocated expenses Totel expenses Net income (less) 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 yea, and four sales clerks who each The company has one office worker who earns $600 per week, or earn $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 the two departments fourth clerk, who works haif-time in both departments, is divided evenly between 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 e. Closing Department 200 will einnrate its expenses for advertising, bad debts, and store supplies, 70% of the nsurance space and equipment currently used by Department 200 expense allocated to t to cover its merchandise inventory, and 25% of the miscellaneous office expenses presently allocated t0 It

Explanation / Answer

Elegant Décor Company Analysis of Expenses under Elimination of Department 200 Total Expenses Eliminated expenses Continuing Expenses Cost of Goods Sold 469000 207000 262000 Direct Expenses Advertising 29000 12000 17000 Store Supplies used 7800 3800 4000 Depreciation - Store Equipment 8300 0 8300 Allocated expenses Sales salaries 104000 39000 65000 Sales salary would be eliminated Rent expenses 14160 0 14160 Bad debt expenses 18000 8100 9900 Office Salary 31200 15600 15600 Insurance expense 3100 770 2330 Miscellaneous office expense 4000 400 3600 Total expenses 688560 286670 401890

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