Dropping Unprofitable Department Thomas Corporation has four departments, all of which appear to be profitable except...

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Dropping Unprofitable Department Thomas Corporation has four departments, all of which appear to be profitable except departm

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Answer 1

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Answer

a
Gross profit percentage = Gross Profit/Sales
Gross profit percentage:
Department 1-3	30%	375000/1250000
Department 4	22%	66000/300000

b

Total margin generated by Department 4

Gross Profit-Direct expenses

66000-24000 = $42000

Firm's Total net income would decrease by $42000 if Department 4 is eliminated

Firm's net income = 114000-42000 = $72,000

The firm's net income would be $72,000

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