Dropping Unprofitable DepartmentThomas Corporation has four departments, all of which appear to be profitable except department 4. Operating data for 2019 are as follows: TotalDepartments 1-3Department 4Sales $962,000$810,000$152,000Cost of sales 640,500526,500114,000Gross profit $321,500$283,500$38,000Direct expenses $144,000$120,000$24,000Common expenses 127,000106,00021,000Total expenses $271,000$226,000$45,000Net income (Loss) $50,500$57,500$(7,000)Requireda. Calculate the gross profit percentage for departments 1-3 combined and for department 4.Department 1-3 Answer%Department 4 Answer%b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.)The firm's net income would be: $Answer

Given Information: Operating data of 4 department is provided Required a. Calculate the gross…

Required a. Calculate the gross profit percentage for departments 1-3 combined and for department 4. Department 1-3 Answer% Department 4 Answer% b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.) The firm's net income would be: $Answer

Required a. Calculate the gross profit percentage for departments 1-3 combined and for department 4. Department 1-3 Answer% Department 4 Answer% b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.) The firm's net income would be: $Answer

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter25: Departmental Accounting

Section: Chapter Questions

Problem 1CP: CHALLENGE PROBLEM This problem challenges you to apply your cumulative accounting knowledge to move...

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	Total	Departments 1-3	Department 4
Sales	$962,000	$810,000	$152,000
Cost of sales	640,500	526,500	114,000
Gross profit	$321,500	$283,500	$38,000
Direct expenses	$144,000	$120,000	$24,000
Common expenses	127,000	106,000	21,000
Total expenses	$271,000	$226,000	$45,000
Net income (Loss)	$50,500	$57,500	$(7,000)

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Dropping Unprofitable Department Thomas Corporation has four departments, all of which appear to be profitable except department 4. Operating data for 2019 are as follows: Total Departments 1-3 Department 4 Sales $962,500 $820,000 $142,500 Cost of sales 655,200 541,200 114,000 Gross profit 307,300 278,800 28,500 Direct expenses $144,000 $120,000 $24,000 Common expenses 117,000 101,000 16,000 Total expenses 261,000 221,000 40,000 Net income (Loss) $46,300 $57,800 $(11,500) Required a. Calculate the gross profit percentage for departments 1-3 combined and for department 4. Department 1-3 Answer=______%Department 4 Answer=______% b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.) The firm's net income would be: $_______
not graded Dropping Unprofitable Department Thomas Corporation has four departments, all of which appear to be profitable except department 4. Operating data for 2019 are as follows: Total Departments 1-3 Department 4 Sales $1,000,000 $900,000 $100,000 Cost of sales 631,000 558,000 73,000 Gross profit 369,000 342,000 27,000 Direct expenses $144,000 $120,000 $24,000 Common expenses 107,000 96,000 11,000 Total expenses 251,000 216,000 35,000 Net income (Loss) $118,000 $126,000 $(8,000) Required a. Calculate the gross profit percentage for departments 1-3 combined and for department 4. Department 1-3 Answer%Department 4 Answer% b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.) The firm's net income would be: $Answer
Analyzing Operational ChangesOperating results for department B of Shaw Company during 2019 are as follows: Sales $800,000 Cost of goods sold 480,000 Gross profit 320,000 Direct expenses 200,000 Common expenses 123,000 Total expenses 323,000 Net loss $(3,000) If department B could maintain the same physical volume of product sold while raising selling prices an average of 6% and making an additional advertising expenditure of $40,000, what would be the effect on the department’s net income or net loss? (Ignore income tax in your calculations.) Use a negative sign with your answer to indicate if the effect increases the company's net loss. If Department B increased its selling price by 6%, the effect on net income (loss) would be $Answer
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 departmental income statements show the following. ELEGANT DECOR COMPANYDepartmental Income StatementsFor Year Ended December 31, 2019 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…
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 departmental income statements show the following. ELEGANT DECOR COMPANYDepartmental Income StatementsFor Year Ended December 31, 2019 Dept. 100 Dept. 200 Combined Sales $ 444,000 $ 281,000 $ 725,000 Cost of goods sold 261,000 210,000 471,000 Gross profit 183,000 71,000 254,000 Operating expenses Direct expenses Advertising 16,500 13,000 29,500 Store supplies used 5,500 4,900 10,400 Depreciation—Store equipment 4,200 2,800 7,000 Total direct expenses 26,200 20,700 46,900 Allocated expenses Sales salaries 65,000 39,000 104,000 Rent expense…
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 departmental income statements show the following. ELEGANT DECOR COMPANYDepartmental Income StatementsFor Year Ended December 31, 2019 Dept. 100 Dept. 200 Combined Sales $ 444,000 $ 281,000 $ 725,000 Cost of goods sold 261,000 210,000 471,000 Gross profit 183,000 71,000 254,000 Operating expenses Direct expenses Advertising 16,500 13,000 29,500 Store supplies used 5,500 4,900 10,400 Depreciation—Store equipment 4,200 2,800 7,000 Total direct expenses 26,200 20,700 46,900 Allocated expenses Sales salaries 65,000 39,000 104,000 Rent expense…
DJH Enterprises has 3 departments. Operating results for 2019 are as follows: Department 1 Department 2 Department 3 Sales $837,500 $402,500 $1,070,000 Variable Costs 556,250 358,750 752,500 Contribution Margin $281,250 $43,750 $317,500 Direct fixed expenses $150,000 $33,750 $203,750 Common fixed expenses 93,750 37,500 117,500 Total fixed expenses $243,750 $71,250 $321,250 Operating income (loss) $37,500 $(27,500) $(3,750) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated. What effect would elimination of Department 3 have on DJH’s total operating income? Select one: a. It would decrease total operating income by $113,750. b. It would decrease total operating income by $317,500. c. None of these options are correct. d. It would increase total operating income by $117,500. e. It would decrease total operating income by $3,750.
DJH Enterprises has 3 departments. Operating results for 2019 are as follows: Department 1 Department 2 Department 3 Sales $938,000 $450,800 $1,198,400 Variable Costs 623,000 401,800 842,800 Contribution Margin $315,000 $49,000 $355,600 Direct fixed expenses $168,000 $37,800 $228,200 Common fixed expenses 105,000 42,000 131,600 Total fixed expenses $273,000 $79,800 $359,800 Operating income (loss) $42,000 $(30,800) $(4,200) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.What effect would elimination of Department 2 have on DJH’s total operating income? Select one: a. It would increase total operating income by $42,000. b. It would decrease total operating income by $7,000. c. It would decrease total operating income by $49,000. d. It would increase total operating income by $30,800. e. It would decrease total operating income by $11,200.
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31 2020 2019 2018 Turnover 373,578 424,486 456,300 Cost of sales (253,604) (254,210) (198,900) Gross profit 119,974 170,276 257,400 Impairment of financial assets (2,477) (1,800) (5,400) Distribution costs (87,036) (91,309) (96,100) Administrative expenses (32,556) (50,656) (67,200) Other operating income 2,369 10,039 3,500 Operating profit 274 36,550 92,200 Finance income 2,594 4,949 7,200 Finance costs (2,069) (2,765) (3,400) Profit before income tax 799 38,734 96,000 Income tax expense (285) (13,718) (15,450) Profit for the year 514 25,016 80,550 Other comprehensive income - - - Total comprehensive income 514 25,016 80,550 Table 1 Source (Author, 2022) CLOUD 9 LTD STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31 Non-current…
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