Dropping Unprofitable Department Thomas 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 $962,500 $820,000 $142,500 Cost of sales 655,200 541,200 114,000 Gross profit 307,300 278,800 28,500 Direct expenses $144,000 $120,000 $24,000 Common expenses 117,000 101,000 16,000 Total expenses 261,000 221,000 40,000 Net income (Loss) $46,300 $57,800 $(11,500) Required a. Calculate the gross profit percentage for departments 1-3 combined and for department 4. Department 1-3 Answer=______% Department 4 Answer=______% b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.) The firm's net income would be: $_______
Dropping Unprofitable Department Thomas 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 $962,500 $820,000 $142,500 Cost of sales 655,200 541,200 114,000 Gross profit 307,300 278,800 28,500 Direct expenses $144,000 $120,000 $24,000 Common expenses 117,000 101,000 16,000 Total expenses 261,000 221,000 40,000 Net income (Loss) $46,300 $57,800 $(11,500) Required a. Calculate the gross profit percentage for departments 1-3 combined and for department 4. Department 1-3 Answer=______% Department 4 Answer=______% b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.) The firm's net income would be: $_______
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Dropping Unprofitable Department
Thomas 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 | $962,500 | $820,000 | $142,500 | |
| Cost of sales | 655,200 | 541,200 | 114,000 | |
| Gross profit | 307,300 | 278,800 | 28,500 | |
| Direct expenses | $144,000 | $120,000 | $24,000 | |
| Common expenses | 117,000 | 101,000 | 16,000 | |
| Total expenses | 261,000 | 221,000 | 40,000 | |
| Net income (Loss) | $46,300 | $57,800 | $(11,500) |
Required
a. Calculate the gross profit percentage for departments 1-3 combined and for department 4.
Department 1-3 Answer=______%
Department 4 Answer=______%
b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.)
The firm's net income would be: $_______
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