[The following information applies to the questions displayed below.] Home 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 2011 departmental income statement shows the following. HOME DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2011 Dept. 100 Dept. 200 Combined Sales $ 450,000 $ 290,000 $ 740,000 Cost of goods sold 260,000 209,000 469,000 Gross profit 190,000 81,000 271,000 Operating expenses Direct expenses Advertising 17,000 14,000 31,000 Store supplies used 5,000 4,600 9,600 Depreciation—Store equipment 4,200 3,100 7,300[The following information applies to the questions displayed below.] Home 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 2011 departmental income statement shows the following. HOME DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2011 Dept. 100 Dept. 200 Combined Sales $ 450,000 $ 290,000 $ 740,000 Cost of goods sold 260,000 209,000 469,000 Gross profit 190,000 81,000 271,000 Operating expenses Direct expenses Advertising 17,000 14,000 31,000 Store supplies used 5,000 4,600 9,600 Depreciation—Store equipment 4,200 3,100 7,300 Total direct expenses 26,200 21,700 47,900 Allocated expenses Sales salaries 78,000 46,800 124,800 Rent expense 9,470 4,730 14,200 Bad debts expense 9,500 7,200 16,700 Office salary 15,600 10,400 26,000 Insurance expense 2,300 1,400 3,700 Miscellaneous office expenses 2,300 1,500 3,800 Total allocated expenses 117,170 72,030 189,200 Total expenses 143,370 93,730 237,100 Net income (loss) $ 46,630 $ (12,730) $ 33,900 In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $500 per week, or $26,000 per year, and four sales clerks who each earn $600 per week, or $31,200 per year. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. c. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office worker’s salary would be reported as sales salaries and half would be reported as office salary. d. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200. e. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 68% of the insurance expense allocated to it to cover its merchandise inventory; and 16% of the miscellaneous office expenses presently allocated to it. 5. Required: 1. Complete the three-column report that lists items and amounts for (a) the company’s total expenses (including cost of goods sold)—in column 1, (b) the expenses that would be eliminated by closing Department 200—in column 2, and (c) the expenses that will continue—in column 3. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)