Mastery Problem InstructionsChart of AccountsLabels and Amount DescriptionsIncome StatementAnalysis   Instructions  Bob’s Acme Supermarket has been in operation for many years, offering high-quality groceries, produce, and meat at reasonable prices. Accounting records are maintained on a departmental basis with assignment of direct expenses and allocation of indirect expenses through the use of various procedures. Selected operating information for the year ended December 31, 20--, is as follows: GroceryMeatProduceTotalNet sales$2,104,890$660,500$345,800$3,111,190Cost of goods sold1,683,912462,350207,4802,353,742Direct operating expenses:    Store clerks’ wages expense125,00058,00038,500221,500Advertising expense25,00038,50018,40081,900Depreciation expense—store equipment10,80015,00012,00037,800Other operating expenses28,20028,54035,60092,340Indirect operating expenses:    Store clerks’ wages expense12,0005,0004,00021,000Advertising expense7,0002,0001,00010,000Depreciation expense—store equipment35,00010,0005,00050,000Store rent60,00020,00020,000100,000Other operating expenses25,5004,50018,45048,450 Required:1.(a) Prepare an income statement showing departmental operating income. (b) Compute the gross profit percentage and operating income percentage for each department (round to the nearest tenth of a percent).2.(a) Prepare an income statement showing departmental and total direct operating margins. (b) Compute the departmental direct operating margin percentage for each department (round to the nearest tenth of a percent).3.Should Bob be concerned about the profitability of the three departments? Should any of the departments be discontinued?  Income Statement  1. (a) Prepare an income statement showing departmental operating income. Additional Instruction Bob’s Acme SupermarketIncome StatementFor Year Ended December 31, 20--1 GroceryMeatProduceTotal2     3     4     5     6     7     8     9     10     11     12        2. (a) Prepare an income statement showing departmental and total direct operating margins. Additional Instruction Bob’s Acme SupermarketIncome StatementFor Year Ended December 31, 20--1 GroceryMeatProduceTotal2     3     4     5     6     7     8     9     10     11     12     13     14     15     16     17     18     19         Analysis  1. (b) Compute the gross profit percentage and operating income percentage for each department (round to the nearest tenth of a percent).Gross profit percentage: Grocery Meat Produce Operating income percentage: Grocery Meat Produce  2. (b) Compute the departmental direct operating margin percentage for each department (round to the nearest tenth of a percent).Departmental direct operating margin percentage:Grocery Meat Produce  3. Should Bob be concerned about the profitability of the three departments?Bob should be concerned about the Produce Department Bob should be concerned about the Grocery Department Bod should not be concerned about any department Bob should be concerned about the Meat Department  Should any of the departments be discontinued?Bob should discontinue the Meat Department Bod should not discontinue any department Bob should discontinue the Grocery Department Bob should discontinue the Produce Department

Question
Asked Dec 12, 2019
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Mastery Problem
 
Instructions
Chart of Accounts
Labels and Amount Descriptions
Income Statement
Analysis
 
 
 
Instructions
 
 
Bob’s Acme Supermarket has been in operation for many years, offering high-quality groceries, produce, and meat at reasonable prices. Accounting records are maintained on a departmental basis with assignment of direct expenses and allocation of indirect expenses through the use of various procedures. Selected operating information for the year ended December 31, 20--, is as follows:
  Grocery Meat Produce Total
Net sales $2,104,890 $660,500 $345,800 $3,111,190
Cost of goods sold 1,683,912 462,350 207,480 2,353,742
Direct operating expenses:        
Store clerks’ wages expense 125,000 58,000 38,500 221,500
Advertising expense 25,000 38,500 18,400 81,900
Depreciation expense—store equipment 10,800 15,000 12,000 37,800
Other operating expenses 28,200 28,540 35,600 92,340
Indirect operating expenses:        
Store clerks’ wages expense 12,000 5,000 4,000 21,000
Advertising expense 7,000 2,000 1,000 10,000
Depreciation expense—store equipment 35,000 10,000 5,000 50,000
Store rent 60,000 20,000 20,000 100,000
Other operating expenses 25,500 4,500 18,450 48,450
 
Required:
1. (a) Prepare an income statement showing departmental operating income.
  (b) Compute the gross profit percentage and operating income percentage for each department (round to the nearest tenth of a percent).
2. (a) Prepare an income statement showing departmental and total direct operating margins.
  (b) Compute the departmental direct operating margin percentage for each department (round to the nearest tenth of a percent).
3. Should Bob be concerned about the profitability of the three departments? Should any of the departments be discontinued?
 
 
Income Statement
 
 
1. (a) Prepare an income statement showing departmental operating income. Additional Instruction
 
Bob’s Acme Supermarket
Income Statement
For Year Ended December 31, 20--
1
 
Grocery
Meat
Produce
Total
2
 
 
 
 
 
3
 
 
 
 
 
4
 
 
 
 
 
5
 
 
 
 
 
6
 
 
 
 
 
7
 
 
 
 
 
8
 
 
 
 
 
9
 
 
 
 
 
10
 
 
 
 
 
11
 
 
 
 
 
12
 
 
 
 
 
 
 
 
2. (a) Prepare an income statement showing departmental and total direct operating margins. Additional Instruction
 
Bob’s Acme Supermarket
Income Statement
For Year Ended December 31, 20--
1
 
Grocery
Meat
Produce
Total
2
 
 
 
 
 
3
 
 
 
 
 
4
 
 
 
 
 
5
 
 
 
 
 
6
 
 
 
 
 
7
 
 
 
 
 
8
 
 
 
 
 
9
 
 
 
 
 
10
 
 
 
 
 
11
 
 
 
 
 
12
 
 
 
 
 
13
 
 
 
 
 
14
 
 
 
 
 
15
 
 
 
 
 
16
 
 
 
 
 
17
 
 
 
 
 
18
 
 
 
 
 
19
 
 
 
 
 
 
 
 
 
Analysis
 
 
1. (b) Compute the gross profit percentage and operating income percentage for each department (round to the nearest tenth of a percent).
Gross profit percentage:  
Grocery
 
Meat
 
Produce
 
Operating income percentage:  
Grocery
 
Meat
 
Produce
 
 
2. (b) Compute the departmental direct operating margin percentage for each department (round to the nearest tenth of a percent).
Departmental direct operating margin percentage:
Grocery
 
Meat
 
Produce
 
 
3. Should Bob be concerned about the profitability of the three departments?
Bob should be concerned about the Produce Department
 
Bob should be concerned about the Grocery Department
 
Bod should not be concerned about any department
 
Bob should be concerned about the Meat Department
 
 
Should any of the departments be discontinued?
Bob should discontinue the Meat Department
 
Bod should not discontinue any department
 
Bob should discontinue the Grocery Department
 
Bob should discontinue the Produce Department
 
 
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Expert Answer

Step 1

1. (a)

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Bob's Acme Supermarket Income statement For the year ended December 31, 20-- Meat Produce Grocery S 2,104,890 Total Net sales Cost of goods sold Gross profit Operating expenses: Store clerks' wages expense Advertising expense Depr. exp.-store equip. S 660,500 S345,800 | S 3,111,190 207,480 1,683,912 462,350 $ 420,978 S 198,150 S138,320 2,353,742 S 757,448 S 137,000 S6,000 S 42,500 S 242,500 32,000 45,800 60,000 40,500 19,400 91,900 25,000 20,000 17,000 20,000 87,800 100,000 Store rent Other operating expenses Total operating expenses Operating income (loss) 53,700 $ 328,500 S 18 1,540 S 16,610 33,040 54,050 S152,950 S-14,630 140,790 $ 662,990 $ 94,458 $ 92,478

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Step 2

1. (b)

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Gross profit percentage: $420,978 , S2,104,890 = 20% S198,150 , Só60,500 = 30% $138,320 , S345,800 = 40% Grocery %3D Meat Produce Operating income percentage: Grocery $92,478 , $2,104,890 = 4.4% S16,610, Só60,500 = 2.5% Produce S(14,630), S345,800 = (4.2%) Meat

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Step 3

2. (a)

...
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Bob's Acme Supermarket Income statement For the year ended December 31, 20- Grocery S 2,104,890 Meat Total Produce Net sales Cost of goods sold Gross profit Direct operating expenses: Store clerks' wages expense Advertising expense Depr. exp.-store equip. Other operating expenses Total direct operating exp. Direct operating margin Indirect operating expenses: Store clerks' wages expense Advertising expense Depr. exp.-store equip. S 660,500 S 345,800o S 3,111,190 1,683,912 462,350 207,480 2,353,742 $ 420,978 S 198,150 S 138,320 S 757,448 S 125,000 S 221,500 81,900 S 58,000 S 38,500 38,500 15,000 25,000 18,400 10,800 12,000 37,800 28,200 28,540 35,600 92,340 S 189,000 S 140,040 S 104,500 S 231,978 $ 433,540 S 323,908 $ 58,110 S 33,820 $ 21,000 10,000 50,000 Store rent 100,000 Other operating expenses Total indirect oper. exp. Орerating incoте 48,450 S 229,450 $ 94,458

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