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 $1,000,000 $900,000 $100,000 Cost of sales 631,000 558,000 73,000 Gross profit 369,000 342,000 27,000 Direct expenses $144,000 $120,000 $24,000 Common expenses 107,000 96,000 11,000 Total expenses 251,000 216,000 35,000 Net income (Loss) $118,000 $126,000 $(8,000) 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: $Answer
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 $1,000,000 $900,000 $100,000 Cost of sales 631,000 558,000 73,000 Gross profit 369,000 342,000 27,000 Direct expenses $144,000 $120,000 $24,000 Common expenses 107,000 96,000 11,000 Total expenses 251,000 216,000 35,000 Net income (Loss) $118,000 $126,000 $(8,000) 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: $Answer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 | $1,000,000 | $900,000 | $100,000 | |
| Cost of sales | 631,000 | 558,000 | 73,000 | |
| Gross profit | 369,000 | 342,000 | 27,000 | |
| Direct expenses | $144,000 | $120,000 | $24,000 | |
| Common expenses | 107,000 | 96,000 | 11,000 | |
| Total expenses | 251,000 | 216,000 | 35,000 | |
| Net income (Loss) | $118,000 | $126,000 | $(8,000) |
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: $Answer
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