Holliday, Inc Holliday Allocates Building Depreciation, Maintenance, and Utilities on the Basis

question 132

Essay

Holliday, Inc., operates a retail store with two departments, A and B. Its departmental income statement for the current year follows:
$$\begin{array}{l}\text { Holliday, Inc. Departmental Income Statement for Year Ended December } 31\\\begin{array} { | l | r | r | r | } \hline & { \text { Dept. A } } & \text { Dept. B } & { \text { Combined } } \\\hline \text { Sales } & \$ 180,000 & \$ 200,000 & \$ 380,000 \\\hline\text { Direct expenses } & \underline { 129,900 } & \underline { 142,870 } & \underline { 272,770 } \\\hline \text { Contributionsto overhead } & \underline {\$ 50,100 }& \underline {\$ 57,130} &\underline { \$ 107,200 }\\\hline \text { Indirect expenses: } & & & \\\hline \text { Depreciation-Building } & 10,000 & 11,760 & 21,760 \\\hline \text { Maintenance } & 1,600 & 1,700 & 3,300 \\\hline \text { Utilities } & 6,200 & 6,320 & 12,520 \\\hline \text { Office expenses } & \underline {1,800} & \underline { 2,000 } & \underline { 3,800} \\\hline\text { Total indirect expenses } &\underline { \$ 19,600} & \underline {\$ 21,780 }&\underline { \$ 41,380} \\\hline \text { Net income } &\underline {\$30,500}&\underline {\$35,350}&\underline {\$65,850}\\\hline\end{array}\end{array}$$ 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.)
$$\begin{array} { | l | r | r | r | r | } \hline & { \text { Dept. A } } & { \text { Dept. B } } & \text { Dept. C } & \text { Combined } \\\hline \text { Sales } & \$ 180,000 & \$ 200,000 & & \\\hline \text { Direct expenses } & 129,900 & 142,870 & & \\\hline \begin{array} { l } \text { Contributionsto } \\\text { overhead }\end{array} & \$ 50,100 & \$ 57,130 & & \\\hline \text { Indirect expenses } & & & & \\\hline \text { Depreciation-building } & & & & \\\hline \text { Maintenance } & & & & \\\hline \text { Utilities } & & & & \\\hline \text { Office expenses } & & & & \\\hline \text { Total indirect expenses } & & & & \\\hline \text { Net income } & & & & \\\hline\end{array}$$

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Definitions:

Selective Attention

The capacity to focus on specific stimuli or tasks in the environment while ignoring others.

Divided Attention

The ability to process two or more responses or react to multiple demands simultaneously.

Automatization

The process of making actions, processes, or operations automatic through the use of technology, machinery, or systems, frequently enhancing efficiency and consistency.

Concrete Situations

Real-life scenarios or problems that require practical solutions, as opposed to abstract or theoretical issues.