Exercise 7-15 M Department Store has 5 departments- M1, M2, M3, M4, and Mo Department M5 is being evaluated using the data below for the store. Dept, M5 P500,000 300,000 P200,000 P200,000 50,000 50,000 P300,000 P(100,000) All Others Total Sales Cost of Sales P4,500,000 2,200,000 P2,300,000 P800,000 450,000 450,000 P1,700,000 P600,000 P5,000,000 2,500,000 P2,500,000 P1,000,000 500,000 500,000 P2,000,000 P500,000 Gross Profit Rent and services Direct salaries Advertising allocation Total expenses Net income Rent and services is a corporate committed fixed expense and is allocated evenly to the five departments. Advertising will not change regardless of the decision, and is allocated using sales revenue. M Department Store is evaluating Department M5's future. REQUIRED: 1. Comment on the following statements about Department M5: a. It is earning P100,000 in variable CM for M Department Store. b. It is earning P150,000 in direct CM for M Department Store. c. It is a P100,000 drain on the profitability of M Department Store. d.The company's overall profitability without Department M5 would be P600,000.
Exercise 7-15 M Department Store has 5 departments- M1, M2, M3, M4, and Mo Department M5 is being evaluated using the data below for the store. Dept, M5 P500,000 300,000 P200,000 P200,000 50,000 50,000 P300,000 P(100,000) All Others Total Sales Cost of Sales P4,500,000 2,200,000 P2,300,000 P800,000 450,000 450,000 P1,700,000 P600,000 P5,000,000 2,500,000 P2,500,000 P1,000,000 500,000 500,000 P2,000,000 P500,000 Gross Profit Rent and services Direct salaries Advertising allocation Total expenses Net income Rent and services is a corporate committed fixed expense and is allocated evenly to the five departments. Advertising will not change regardless of the decision, and is allocated using sales revenue. M Department Store is evaluating Department M5's future. REQUIRED: 1. Comment on the following statements about Department M5: a. It is earning P100,000 in variable CM for M Department Store. b. It is earning P150,000 in direct CM for M Department Store. c. It is a P100,000 drain on the profitability of M Department Store. d.The company's overall profitability without Department M5 would be P600,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please help me to answer the Required 1 (A - D) completely with supporting computations. Thank you!
Transcribed Image Text:Exercise 7-15
M Department Store has 5 departments- M1, M2, M3, M4, and MS.
Department M5 is being evaluated using the data below for the store.
Total
Dept, M5
P500,000
300,000
P200,000
P200,000
50,000
50,000
P300,000
P(100,000)
All Others
Sales
P4,500,000
2,200,000
P2,300,000
P800,000
450,000
450,000
P1,700,000
P600,000
P5,000,000
2,500,000
P2,500,000
P1,000,000
500,000
500,000
P2,000,000
P500,000
Cost of Sales
Gross Profit
Rent and services
Direct salaries
Advertising allocation
Total expenses
Net income
Rent and services is a corporate committed fixed expense and is allocated
evenly to the five departments. Advertising will not change regardless of the
decision, and is allocated using sales revenue. M Department Store is evaluating
Department M5's future.
REQUIRED:
1. Comment on the following statements about Department M5:
a. It is earning P100,000 in variable CM for M Department Store.
b. It is earning P150,000 in direct CM for M Department Store.
c. It is a P100,000 drain on the profitability of M Department Store.
d.The company's overall profitability without Department M5 would be P600,000.
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