Departmental Contribution to Common Expenses Certain operating information is shown next for Harris Department Store:...
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Departmental Contribution to Common Expenses Certain operating information is shown next for Harris Department Store: The managers are disappointed with the operating results of department R. They do not believe that competition will permit raising prices; however, they believe that spending $10,000 more for promoting this department's products will increase the physical volume of products sold by 20%. An alternative is to discontinue department R and use the space to expand department S. It is believed that department S's physical volume of products sold can thus be increased 35%. Special sales personnel are needed, however, and department S's traceable expenses would increase by $48,000. Neither alternative would appreciably affect the total common departmental expense. Required a. Calculate the contribution now being made to common expenses by department R, by department S, and by the combination of other departments. b. Which of the two alternatives should management choose: increase promotional outlays for department R, or discontinue department R and expand department S? Support your answer with calculations
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Departmental Contribution to Common Expenses Certain operating information is shown next for Harris Department Store: The managers are disappointed with the operating results of department R. They do not believe that competition will permit raising prices; however, they believe that spending $10,000 more for promoting this department's products will increase the physical volume of products sold by 20%. An alternative is to discontinue department R and use the space to expand department S. It is believed that department S's physical volume of products sold can thus be increased 35%. Special sales personnel are needed, however, and department S's traceable expenses would increase by $48,000. Neither alternative would appreciably affect the total common departmental expense. Required a. Calculate the contribution now being made to common expenses by department R, by department S, and by the combination of other departments. b. Which of the two alternatives should management choose: increase promotional outlays for department R, or discontinue department R and expand department S? Support your answer with calculations 