Question

Wiliams Company began operations in January 2015 with two operating (selling) departments and one service (office) department. Ils departmental income statements follow WILLIAMS COMPANY Departmental Income Statements For Year Ended December 31, 2015 Clock Mirror Combined $ 200,000 $125 000 $325.000 98.000 77500 175.500 Sales Cost of goods sold 102,000 47,500 149,500 Gross profit Direct expenses Sales salaries Advertising Store supplies used Depreciation Equipment 21000 2 200 550 1.900 8,600 200 650 700 29.600 2.400 1200 2.600 25,650 10,150 35.800 Total direct expenses Allocated expenses Rent expense Uslities expense Share of office department expenses 7,090 2.400 10.500 3.540 2.400 9500 10 630 4.800 20.000 Total allocated expenses 19 990 15.440 35 430 Total expenses 45.540 25 500 71.230 Net income $ 56.360 $ 21,910 $ 78.270 Wiams plans to open a third department in January 2016 that will parts Management predicts that the new department will generate 551000 in sales with a 55% gross profit margin and will require the following direct expenses: sales salaries. 59.000. advertising 51.100 store supplies 1400 and equipment depreciation, $300. It will the new department into the current rented space by taking some square foot age from the other two departments. When opened the new parting department will one of the space presently used by the clock department and one fourth used by the department Management does not predict any increase in sites costs, which are allocated to the departments in proportion to Occupied space for rent expense. The company allocales ce department expenses to the corating departments in proportion to their sales expects the painting department to increase total office

Answer 1

Please find below table useful to compute desired results: -

A н For the year ended Dec 31, 2016 Clock Mirror Paintings =B1*(1+$B$25) =C1*(1+$B$25) =B16 =B2*(1+$B$25) =C2*(1+$B$25) =15-17 =G5-G6 =H5-H6 =15*B17 Combined =SUM(G5:15) =SUM(G6:16) =SUM(G7:17) 3 Gross profit =B1-B2 =C1-C2 =D1-D2 4 Sales salaries 21000 8600 29600 5 Advertising 2200 200 2400 6 Store supplies used 550 650 1200 7 Depreciation 1900 700 2600 8 Total direct Expenses =SUMB4:B7) =SUM(C4:C7) =SUMD4:D7) 9 Rent Expenses 7090 3540 10630 10 Utilities Expenses 2400 2400 4800 11 Share of office department expenses (10500 9500 20000 12 Total Allocated expenses =SUMB9-B11) =SUM(C9:C11) =SUMD9-D11) 13 Total Expenses =B12+B8 =C12+C8 =D12+D8 14 Net Income =B3-B13 =C3-C13 1=D3-D13 Particulars Sales Cost of goods Sold Gross Profit Direct Expenses Sales Salaries Advertising Store supplies used Depreciation of equipment Total direct expenses Allocated Expenses Rent Expense Utilities Expense Share of office department expenses Total allocated expenses Total Expenses Net Income =B4 =C4 =B18 =B5 =C5 =B19 =B6*(1+$B$25) =C6*(1+$B$25) =B20 =B7 =B21 =SUM(G9:G12) =SUM(H9 H12) =SUM(19:112) =SUM(G9:19) =SUM( G10:110) =SUM(G11:111) =SUM(G12:112) =SUM(G13:113) =C7 15 51000 =55/100 9000 1100 =B9-(B9*B22) =C9-C9*B23 =B9*B22+C9*B23 =SUM(G15:115) | =J16/J15*G15 =J16/J15*H15 =J16/J15*115 =D10 =J17/J5*G5 =J17/55*H5 =J17/55*15 =B24+D11 =SUM(G15 G17) =SUM(H15H17) =SUM(115:117) =SUM(J15:J17) =G13+G18 =H13+H18 =113+118 =J13+J18 =G5-G19 =H5-H19 =15-119 =J5-119 400 16 New department sale 17 Gross profit margin 18 Sales salaries 19 Advertising 20 Store supplies used 21 Depreciation 22 Space used in proportion of clock 23 Space used in proportion of mirror 24 Total office departmental expense 25 Expected increase in sales 300 =1/5 1=1/4 7800 1=5/100

End results would be as follows: -

B А 3 Gross profit 4 Sales salaries 5 Advertising 6 Store supplies used 7 Depreciation 8 Total direct Expenses 9 Rent Expenses 10 Utilities Expenses 11 Share of office department expenses 12 Total Allocated expenses 13 Total Expenses 14 Net Income 15 16 New department sale 17 Gross profit margin 18 Sales salaries 19 Advertising 20 Store supplies used 21 Depreciation 22 Space used in proportion of clock 23 Space used in proportion of mirror 24 Total office departmental expense 25 Expected increase in sales 102,000.00 21,000.00 2.200.00 550.00 1,900.00 25.650.00 7.090.00 2,400.00 10,500.00 19.990.00 45,640.00 56,360.00 47,500.00 8.600.00 200.00 650.00 700.00 10.150.00 3.540.00 2.400.00 9,500.00 15,440.00 25,590.00 21.910.00 DF 149,500.00 For the year ended Dec 31, 2016 29.600.00 Particulars Clock Mirror Paintings Combined 2.400.00 || Sales 210,000.00 131.250.00 51,000.00 392.250.00 1,200.00 || Cost of goods Sold 102.900.00 81.375.00 22,950.00 207,225.00 2,600.00 || Gross Profit | 107,100.00 49.875.00 28.050.00 185.025.00 35.800.00 ||Direct Expenses 10.630.00 Sales Salaries 21,000.00 8,600.00 9,000.00 38.600.00 4.800.00 || Advertising 2.200.00 200.00 1.100.00 3,500.00 20,000.00 || Store supplies used 577.50 682.50 400.00 1,660.00 35,430.00 | Depreciation of equipment 1,900.00 700.00 300.00 2.900.00 71.230.00 || Total direct expenses 25,677.50 10.182.50 10.800.00 46,660.00 78.270.00 Allocated Expenses Rent Expense 5.672.00 2,655.00 2,303.00 10,630.00 Utilities Expense 2.561.20 1.198.87 1.039.92 4.800.00 Share of office department expenses 14.883.37 9,302.10 3,614.53 27.800.00 Total allocated expenses 23.116.57 13,155.97 6,957.46 43,230.00 Total Expenses 48.794.07 23,338.47 17.757.46 89.890.00 Net Income 161,205.93 107,911.53 33.242.54 302,360.00 51,000.00 55% 9,000.00 1,100.00 400.00 300.00 20% 25% 7,800.00 5%