Holliday Inc operates a retail store with two departments A and B

Question

Holliday, Inc., operates a retail store with two departments, A and B. Its departmental income statement for the current year follows:

Holliday, Inc. Departmental Income Statement For Year Ended December 31
	Dept. A	Dept. B	Combined
Sales	$180,000	$200,000	$380,000
Direct expenses	129,900	142,870	272,770
Contributions to overhead	$ 50,100	$ 57,130	$107,230
Indirect expenses:
Depreciation--Building	10,000	11,760	21,760
Maintenance	1,600	1,700	3,300
Utilities	6,200	6,320	12,520
Office expenses	1,800	2,000	3,800
Total indirect expenses	$ 19,600	$ 21,780	$ 41,380
Net income	$ 30,500	$ 35,350	$ 65,850

Holliday allocates building depreciation, maintenance, and utilities on the basis of square footage. Office expenses are allocated on the basis of sales.
Management is considering an expansion to a three-department operation. The proposed Department C would generate $120,000 in additional sales and have a 17.5% contribution to overhead. The company owns its building. Opening Department C would redistribute the square footage to each department as follows: A, 19,040; B, 21,760 sq. ft.; C, 13,600. Increases in indirect expenses would include: maintenance, $500; utilities, $3,800; and office expenses, $1,200.
Complete the following departmental income statements, showing projected results of operations for the three sales departments. (Round amounts to the nearest whole dollar.)

Dept. A

Dept. B

Dept. C

Combined

Sales.........................................................................

$180,000

$200,000

Direct expenses.......................................................

129,900

142,870

Contributions to overhead......................................

$ 50,100

$ 57,130

Indirect expenses......................................................

Depreciationbuilding......................................

Maintenance.......................................................

Utilities..............................................................

Office expenses..................................................

Total indirect expenses......................................

Net income...............................................................

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