Question

Problem 22-3A Departmental income statements; forecasts LO P3 Williams Company began operations in January 2019 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, 2019 Clock Mirror Combined Sales $260,000 $115,000 $375,000 Cost of goods sold 127,489 71,300 198,789 Gross profit 132,600 43,780 176,309 Direct expenses Sales salaries 20,500 6,880 27,300 Advertising 2,200 1600 2,800 Store supplies used 1,050 400 1,450 Depreciation Equipment 2,800 Total direct expenses 25,850 8,50034,350 Allocated expenses Rent expense 7,090 3,689 19,690 Utilities expense 2,400 1,300 3,700 Share of office department 12,500 5,eee 17,500 expenses Total allocated expense 21.990 9.900 31.890 Total expenses 47,840 18,400 66,240 Net income $ 84,760 25,300 $110,660 2,100 700 Williams plans to open the department in January 2020 that will sell paintings. Management predicts that the new department will generate 552,000 in sales with a 65 gross profit margin and will require the following direct expenses sales salaries $2.500 vertising $900, store supplies, 5600, and equipment depreciation, $300. 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 one of the ce presently used by the Clock department and one fourth used by the Mirror department Management does not predicta Increase in utilities costs, which are allocated to the departments in proportion to occupied space for rent expense) The company te office department expenses to the operating departments in proportion to their sales it expects the Painting department to Inese total office department expenses by $8.000. Since the Painting department will bring new customers into the store n ement expects sales in both the clock and Mirror departments to increase by 1. No changes for those departments Bercent of the direct expenses are expected except for store supplies used, which will increase proportion to sales

Answer 1

WILLIAMS COMPANY
Forecasted Departmental Income Statements
For Year Ended December 31, 2020
	Clock	Mirror	Paintings	Combined
Sales	288,600	127,650	52,000	468,250
Cost of goods sold	141,414	79,143	18,200	238,757
Gross profit	147,186	48,507	33,800	229,493
Direct expenses
Sales salaries	20,500	6,800	7,500	34,800
Advertising	2,200	600	900	3,700
Store supplies used	1,166	444	600	2,210
Depreciation of equipment	2,100	700	300	3,100
Total direct expenses	25,966	8,544	9,300	43,810
Allocated expenses
Rent expense	5,672	2,700	2,318	10,690
Utilities expense	1,920	975	805	3,700
Share of office dept. expenses	15,717	6,952	2,832	25,500
Total allocated expenses	23,309	10,627	5,955	39,890
Total expenses	49,274	19,171	15,255	83,700
Net income	97,912	29,336	18,545	145,794