Williams Company began operations in January 2019 with two operating (selling) departments and one service office...

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WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2020 Clock Mirror Paintings Combined S

Williams Company began operations in January 2019 with two operating (selling) departments and one service office...

Williams Company began operations in January 2019 with two operating (selling) departments and one service office department. Its departmental income statements follow WILLING COMPANY Departmental Income Statements Loe Year Ended December 31, 2019 Clock Mirror Combined Sales $ 140,000$ 85,000 $225,000 Cost of goods sold 68,600 52,700 121,300 Gross profit 71. 400 32,300 103,706 Direct expenses Sales salaries 22.000 7.300 29, 300 Advertising 2,200 200 2,400 Store supplies used 1.050 700 1,750 Depreciation Equipment 1.900 2,300 Total direct expenses 21.156 B606 35,750 allocated expenses Rent expense 7. 120 2.540 10.660 Utilities expense 2.300 2.200 4.500 Share of office departent expenses 13,500 9.000 22,500 Total allocated expenses 22.020 . 26 660 Total expenses 50,076 2016 TO Net inec 21.330 $ 3.960 $ 30.290 400 Williams plans to open a third department in January 2020 that will sell paintings. Management predicts that the new department will generate $50,000 in sales with a 45% gross profit margin and will require the following direct expenses: sales salaries, $6,500, advertising. 5600; store supplies, $600, and equipment depreciation, $600. It will fit the new department into the current rented space by taking some square footage from the other two departments. When opened, the new Painting department will fill one-fifth of the space presently used by the Clock department and one-fourth used by the Mirror department Management does not predict any Increase in utilities costs, which are allocated to the departments in proportion to occupled space for rent expenses. The company allocates office department expenses to the operating departments in proportion to their sales. It expects the Painting department to Increase total office department expenses by $7,300. Since the Painting department will bring new customers into the store, management expects sales in both the Clock and Mirror departments to increase by 13%. No changes for those departments' gross profit percents or their direct expenses are expected except for store supplies used, which will increase in proportion to sales. Required: Prepare departmental Income statements that show the company's predicted results of operations for calendar-year 2020 for the three operating (selling) departments and their combined totals. (Do not round Intermediate calculations. Round your final answers to nearest whole dollar amount.)

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Answer 1

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Solution:

Williams Company
Forecasted Departmental Income statement
For the year ended Dec 31, 2020
Particulars	Clock	Mirror	Paintings	Combined
Sales	$158,200	$96,050	$50,000	$304,250
Cost of goods sold	$77,518	$59,551	$27,500	$164,569
Gross Profit	$80,682	$36,499	$22,500	$139,681
Direct expenses:
Sales Salaries	$22,000	$7,300	$6,500	$35,800
Advertising	$2,200	$200	$600	$3,000
Store supplies used	$1,187	$791	$600	$2,578
Depreciation of equipment	$1,900	$400	$600	$2,900
Total direct expenses	$27,287	$8,691	$8,300	$44,278
Allocated Expenses:
Rent expense	$5,696	$2,655	$2,309	$10,660
Utilities Expense	$2,405	$1,121	$975	$4,500
Share of office department expenses	$15,495	$9,408	$4,897	$29,800
Total allocated expenses	$23,596	$13,183	$8,181	$44,960
Total expenses	$50,882	$21,874	$16,481	$89,238
Net Income	$29,800	$14,625	$6,019	$50,444

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