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M Department Store has 5 departments-

M Department Store has 5 departments-

Quickbooks Online Accounting
Quickbooks Online Accounting
3rd Edition
ISBN:9780357391693
Author:Owen
Publisher:Owen
Chapter3: Setting Up A New Company
Section: Chapter Questions
Problem 3.4C
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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 50,000 Р300,000 P(100,000) All Others Total Sales P4,500,000 2,200,000 P2,300,000 P800,000 450,000 450,000 P1,700,000 Р600,000 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.
Transcribed Image Text: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 50,000 Р300,000 P(100,000) All Others Total Sales P4,500,000 2,200,000 P2,300,000 P800,000 450,000 450,000 P1,700,000 Р600,000 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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