Textbook Problem

Moon Company is considering eliminating its Drapery Department. Management does not believe the indirect expenses and the level of operations in the other departments will be affected if the Drapery Department closes. Information from Moon’s income statement for the fiscal year ended December 31, which is considered a typical year, is as follows:

Moon considers $19,000 of the operating expenses of the Drapery Department to be direct expenses.

Required

Calculate the departmental margin of the Drapery Department.

Check Figure

Gross Profit, $26,000