Jorgensen Department Store has three departments: Clothing, Toys, and Hardware. The most recent income statement,...
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Jorgensen Department Store has three departments: Clothing, Toys, and Hardware. The most recent income statement, showing the total operating profit and departmental results is shown below: ClothingToys Hardware 2,100,000 $1,000,000 600,000 500,000 Sales Cost of goods sold 1,260,000) Gross profit Direct expenses Allocated expenses Net income (loss) (500,000) (400,000) (360,000) 840,000 500,000 200,000 140,000 (420,000) (200,000) (100,000) (120,oo (350,000) (100,000) 70,000 200,000 (75,000) (17 25,000 $(155 $ Based on this income statement, management is planning on eliminating the hardware department, as it is generating a net loss. If the hardware department is eliminated, the toy department will expand to fill the space, but neither the sales nor the direct expenses of the toy department will change in total. None of the allocated expenses will be avoided, but they will be reallocated. Clothing will be allocated $200,000 of these expenses and Toys will be allocated $150,000 of these expenses. REQUIRED
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