M Department Store has 5 departments- M1, M2, M3, M4, and M5. Department M5 is being evaluated using the data below for the store. Dept, M5 P500,000 300,000 P200,000 P200,000 50,000 All Others Total Sales P4,500,000 P5,000,000 2,500,000 P2,500,000 P1,000,000 500,000 500,000 P2,000,000 P500,000 Cost of Sales 2,200,000 P2,300,000 P800,000 450,000 450,000 Gross Profit Rent and services Direct salaries Advertising allocation Total expenses 50,000 P300,000 P1,700,000 P600,000 Net income P(100,000) 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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please help me c and d, thank you

M Department Store has 5 departments-
Department M5 is being evaluated using the data below for the store.
Mі, M2, МЗ, М4, and MS.
Dept, M5
P500,000
300,000
P200,000
P200,000
50,000
All Others
Total
Sales
P4,500,000
2,200,000
P2,300,000
P800,000
450,000
P5,000,000
2,500,000
P2,500,000
P1,000,000
500,000
Cost of Sales
Gross Profit
Rent and services
Direct salaries
Advertising allocation
Total expenses
Net income
450,000
P1,700,000
P600,000
50,000
P300,000
500,000
P2,000,000
P500,000
P(100,000)
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.
Transcribed Image Text:M Department Store has 5 departments- Department M5 is being evaluated using the data below for the store. Mі, M2, МЗ, М4, and MS. Dept, M5 P500,000 300,000 P200,000 P200,000 50,000 All Others Total Sales P4,500,000 2,200,000 P2,300,000 P800,000 450,000 P5,000,000 2,500,000 P2,500,000 P1,000,000 500,000 Cost of Sales Gross Profit Rent and services Direct salaries Advertising allocation Total expenses Net income 450,000 P1,700,000 P600,000 50,000 P300,000 500,000 P2,000,000 P500,000 P(100,000) 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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