Departmental Income Statement
Elgin Flooring Company sells floor coverings through two departments, carpeting and hard covering (tile and linoleum). Operating information for 2016 appears below.
| Inventory, January 1, 2016 |
$65,000 |
$31,000 |
| Inventory, December 31, 2016 |
45,000 |
25,000 |
| Net sales |
780,000 |
480,000 |
| Purchases |
484,000 |
362,000 |
| Purchases returns |
28,000 |
8,000 |
| Purchases discounts |
16,000 |
4,000 |
| Transporation in |
18,000 |
14,000 |
| Traceable departmental expenses |
104,000 |
52,000 |
Common operating expenses of the firm were $120,000.
a. Prepare a departmental income statement showing departmental contribution to common expenses and net income of the firm. Assume an overall effective income tax rate of 35%. Elgin uses a periodic inventory system.
b. Calculate the gross profit percentage for each department.
Round to the nearest whole percentage.
Carpeting department
Hard Covering department
c. If the common expenses were allocated 70% to the carpeting department and 30% to the hard covering department, what would the net income be for each department?