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

Essay

Burien,Inc.operates a retail store with two departments,A and
B. Its departmental income statement for the current year follows:
$\begin{array}{c}\text { BURIEN, INC. }\\ \text { Departmental Income Statement }\\ \text { For Year Ended December 31}\\\begin{array}{lccc}&\text { Dept. A }&\text {Dept. B }&\text {Combined }\\ \text {Sales}& \$ 180,000 & \$ 200,000 & \$ 380,000 \\ \text { Direct expenses } & 129,900 & 142,870 & 272,77 \\ \text { Contributions to overhead } & \$ 50,100 & \$ 57,130 & \$ 107,23 \\\text { Indirect expenses: }\\\text { Depreciation--building } & 10,000 & 11,760 & 21,760 \\\text { Maintenance } & 1,600 & 1,700 & 3,300 \\\text { Utilities } & 6,200 & 6,320 & 12,520 \\\text { Office expenses } & 1,800 & 2,000 & 3,800 \\\text { Total indirect expenses } &\$19,600&\$21,780&\$41,380\\\text { Net income }&\$30,500&\$35,350&\$65,850\end{array}\end{array}$ Burien 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.)