College Accounting: Chapter 25 Mastery Problem - Bob's Acme Supermarket has been in operation

College Accounting Chapter 25 Mastery Problem Bob's Acme Supermarket has been in operation for many years offering high quality groceries, produce, and meat at reasonable prices. Accounting records are maintained on a departmental basis with assignment of direct expenses and allocation of indirect expenses through the use of various procedures. Selected operating information for the year ended December 31, 20--, is as follows: Grocery Meat Produce Total Net sales 2,104,890 660,500 345,800 3,111,190 Cost of goods sold 1,683,912 462,350 207,480 2,353,742 Direct operating expenses: Store clerks' wages expense 125,000 58,000 38,500 221,500 Advertising expense 25,000 38,500 18,400 81,900 Depreciation expense - store equipment 10,800 15,000 12,000 37,800 Other operating expenses 28,200 28,540 35,600 92,340 Indirect operating expenses: Store clerks' wages expense 12,000 5,000 4,000 21,000 Advertising expense 7,000 2,000 1,000 10,000 Depreciation expense - store equipment 35,000 10,000 5,000 50,000 Store rent 60,000 20,000 20,000 100,000 Other operating expenses 25,500 4,500 18,450 48,450 Required 1. a) Prepare an income statement showing departmental operating income. b) Compute the gross profit percentage and operating income percentage for each department (round to the nearest tenth of a percent). 2. a) Prepare an income statement showing departmental and total direct operating margins. b) Compute the departmental direct operating margin percentage for each department (round to the nearest tenth of a percent). 3. Should Bob be concerned about the profitability of the three departments? Should any of the departments be discontinued?
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