A portion of the divisional income statement for the year just ended is presented below in a condensed form.Department FNet sales$93,800Cost of goods sold72,400Gross profit$21,400Operating expenses28,900Loss from operations$(7,500)The operating expenses of Department F include $16,000 for direct expenses.It is estimated that the discontinuance of Department F would not have affected the sales of the other departments nor have reduced the indirect expenses of the business. Assuming the accuracy of these estimates, determine the effect (increaseor decrease and the amount) on the operating income of the business if Department F had been discontinued.X Decrease

If Department F is discontinued the operating expenses excluding the direct expenses will be…

Answered: he discontinuance of Department F w

Business

Accounting

he discontinuance of Department F w

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter25: Departmental Accounting

Section: Chapter Questions

Problem 2CE

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A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31, 20Y9, is as follows: Sales $1,575,000 Cost of goods sold (891,000) Gross profit $684,000 Operating expenses (558,000) Operating income $126,000 Invested assets $1,050,000 Assume that the Electronics Division received no allocations from support departments. The president of Gihbli Industries Inc. has indicated that the division's return on a $1,050,000 investment must be increased to at least 20% by the end of the next year if operations are to continue. The division manager is considering the following three proposals: Proposal 1: Transfer equipment with a book value of $300,000 to other divisions at no gain or loss and lease similar equipment. The annual lease payments would be less than the amount of depreciation expense on the old equipment by $31,400. This decrease in expense would be included as part of the cost of goods sold. Sales would…
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