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....
Williams and Lloyd Company is trying to decide whether to
discontinue department B. Operating results for...
Williams and Lloyd Company is trying to decide whether to
discontinue department B. Operating results for the year just ended
for each of the company's three departments and for the entire
operation are shown.
Dept. A
Dept. B
Dept. C
Total
Net sales
$379,000
$265,000
$287,000
$931,000
Cost of goods sold
205,000
150,000
155,000
510,000
Gross profit
$174,000
$115,000
$132,000
$421,000
Direct operating expenses
105,000
85,000
80,000
270,000
Departmental direct operating margin
$69,000
$30,000
$52,000
$151,000
Indirect operating expenses
40,000 ...
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...
Williams Company began operations in January 2017 with two
operating (selling) departments and one service (office)...
Williams Company began operations in January 2017 with two
operating (selling) departments and one service (office)
department. Its departmental income statements follow.
WILLIAMS COMPANY
Departmental Income Statements
For Year Ended December 31, 2017
Clock
Mirror
Combined
Sales
$
170,000
$
115,000
$
285,000
Cost of goods
sold
83,300
71,300
154,600
Gross
profit
86,700
43,700
130,400
Direct
expenses
Sales
salaries
22,500
8,000
30,500
Advertising
1,700
700
2,400
Store supplies
used
950
250
1,200
Depreciation—Equipment
2,100
400
2,500
Total direct
expenses
27,250...
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,...
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...
Williams Company began operations in January 2017 with two
operating (selling) departments and one service (office)...
Williams Company began operations in January 2017 with two
operating (selling) departments and one service (office)
department. Its departmental income statements follow.
WILLIAMS COMPANY
Departmental Income Statements
For Year Ended December 31, 2017
Clock
Mirror
Combined
Sales
$
140,000
$
85,000
$
225,000
Cost of goods sold
68,600
52,700
121,300
Gross profit
71,400
32,300
103,700
Direct expenses
Sales salaries
21,500
7,700
29,200
Advertising
1,100
900
2,000
Store supplies used
950
600
1,550
Depreciation—Equipment
2,100
800
2,900
Total direct expenses
25,650...
Bed & Bath, a retailing company, has two departments,
Hardware and Linens. The company’s most recent...
Bed & Bath, a retailing company, has two departments,
Hardware and Linens. The company’s most recent monthly contribution
format income statement follows:
Department
Total
Hardware
Linens
Sales
$
4,240,000
$
3,140,000
$
1,100,000
Variable
expenses
1,297,000
882,000
415,000
Contribution
margin
2,943,000
2,258,000
685,000
Fixed expenses
2,290,000
1,420,000
870,000
Net operating income
(loss)
$
653,000
$
838,000
$
(185,000
)
A study indicates that $378,000 of the fixed expenses being
charged to Linens are sunk costs or allocated costs that will...