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

College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter25: Departmental Accounting
Section: Chapter Questions
Problem 1MP: MASTERY PROBLEM Bobs Acme Supermarket has been in operation for many years, offering high-quality...
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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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