# 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
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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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Step 1

1. (a)

Step 2

1. (b)

Step 3

2. (a)

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