Question

Dropping Unprofitable Department Penn Corporation has four departments, all of which appear to be profitable except...

Dropping Unprofitable Department

Penn 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 $1,230,000 $1,050,000 $180,000
Cost of sales

801,900

661,500

140,400
Gross profit

428,100

388,500

39,600
Direct expenses $177,000 $150,000 $27,000
Common expenses

145,200

122,600

22,600
Total expenses

322,200

272,600

49,600
Net income (Loss)

$105,900

$115,900

$(10,000)

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

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Penn Corporation has four departments, all of which appear to be profitable except department 4. Operating...
Penn Corporation has four departments, all of which appear to be profitable except department 4. Operating data for 2016 are as follows: Total Departments 1-3 Department 4 Sales $1,052,000 $900,000 $152,000 Cost of sales 654,000 540,000 114,000 Gross profit $398,000 $360,000 $38,000 Direct expenses $177,000 $150,000 $27,000 Common expenses 140,000 120,000 20,000 Total expenses 317,000 $270,000 $47,000 Net income (loss) $81,000 $90,000 $(9,000) Calculate the gross profit percentage for departments 1-3 combined and for department 4. What effect would elimination...
Analyze Operational Changes The management of Manchester’s Department Store is concerned about the operation of its...
Analyze Operational Changes The management of Manchester’s Department Store is concerned about the operation of its sporting goods department, which has not been very successful. The following condensed income statement gives the latest year’s results: Sporting Goods Department All Other Departments Sales $480,000 $2,400,000 Cost of goods sold 360,000 1,560,000 Gross profit 120,000 840,000 Direct expenses 67,500 336,000 Indirect expenses 48,000 240,000 Total expenses 115,500 576,000 Net income (Loss) $4,500 $264,000 a. Calculate the gross profit percentage for the sporting...
Wasilko Corporation has two departments, Kids and Adults. The company’s most recent monthly contribution format income...
Wasilko Corporation has two departments, Kids and Adults. The company’s most recent monthly contribution format income statement follows: Department Total Kids Adults Sales $4,200,000 $3,000,000 $1,200,000 Variable expenses 2,000,000 1,500,000 500,000 Contribution Margin 2,200,000 1,500,000 700,000 Fixed Expenses 2,200,000 1,300,000 900,000 Net operating income (loss) 0 200,000 (200,000) A study indicates that $50,000 of the fixed expenses being charged to the Adults Department are sunk costs or allocated costs that will continue even if the Adults Department is dropped. In...
Wonders Corporation has two departments, Kids and Adults. The company’s most recent monthly contribution format income...
Wonders Corporation has two departments, Kids and Adults. The company’s most recent monthly contribution format income statement follows: Department Total Kids Adults Sales $4,200,000 $3,000,000 $1,200,000 Variable expenses 2,000,000 1,500,000 500,000 Contribution Margin 2,200,000 1,500,000 700,000 Fixed Expenses 2,200,000 1,300,000 900,000 Net operating income (loss) 0 200,000 (200,000) A study indicates that $250,000 of the fixed expenses being charged to the Adults Department are sunk costs or allocated costs that will continue even if the Adults Department is dropped. In...
Wasilko Corporation has two departments, Kids and Adults. The company’s most recent monthly contribution format income...
Wasilko Corporation has two departments, Kids and Adults. The company’s most recent monthly contribution format income statement follows: Total Kids Adults Sales $4,200,000 $3,000,000 $1,200,000 Variable expenses 2,000,000 1,500,000 500,000 Contribution Margin 2,200,000 1,500,000 700,000 Fixed Expenses 2,200,000 1,300,000 900,000 Net operating income (loss) 0 200,000 (200,000) A study indicates that $250,000 of the fixed expenses being charged to the Adults Department are sunk costs or allocated costs that will continue even if the Adults Department is dropped. In addition,...
Analyzing Operational Changes Operating results for department B of Shaw Company during 2016 are as follows:...
Analyzing Operational Changes Operating results for department B of Shaw Company during 2016 are as follows: Sales $760,000 Cost of goods sold 480,000 Gross profit 280,000 Direct expenses 215,000 Common expenses 123,000 Total expenses 338,000 Net loss $(58,000) If department B could maintain the same physical volume of product sold while raising selling prices an average of 10% and making an additional advertising expenditure of $30,000, what would be the effect on the department's net income or net loss? (Ignore...
Analyzing Operational Changes Operating results for department B of Delta Company during 2019 are as follows:...
Analyzing Operational Changes Operating results for department B of Delta Company during 2019 are as follows: Sales $540,000 Cost of goods sold 378,000 Gross profit 162,000 Direct expenses 120,000 Common expenses 66,000 Total expenses 186,000 Net loss $(24,000) If department B could maintain the same physical volume of product sold while raising selling prices an average of 5% and making an additional advertising expenditure of $30,000, what would be the effect on the department’s net income or net loss? (Ignore...
The centralized employee travel department of Camtro Company has expenses of $528,000. The department has serviced...
The centralized employee travel department of Camtro Company has expenses of $528,000. The department has serviced a total of 6,000 travel reservations for the period. The Northeast Division has made 2,400 reservations during the period, and the Pacific Division has made 3,600 reservations. Northeast Division Pacific Division Sales $1,155,000 $1,204,000 Cost of goods sold 590,800 658,000 Selling expenses 231,000 252,000 Use the data provided to determine the divisional income from operations for the Northeast and Pacific divisions. Refer to the...
Elegant Decor Company’s management is trying to decide whether to eliminate Department 200, which has produced...
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 2017 departmental income statements shows the following. ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2017 Dept. 100 Dept. 200 Combined Sales $ 450,000 $ 281,000 $ 731,000 Cost of goods sold 260,000 214,000 474,000 Gross profit 190,000 67,000 257,000 Operating expenses Direct expenses Advertising 15,500 11,500 27,000 Store supplies used 5,500...
Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear...
Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 980,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 12%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year. The market value of the company’s common stock...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT