Answer:
A. Department (1-3) = 40%
Department 4 =25%
B. $70,000
Explanation:
A. Calculation for the gross profit percentage for departments 1-3 combined and for department 4.
Using this formula
Gross profit percentage = Gross Profit /Sales
Let plug in the formula
Department (1-3) (360,000/900,000) = 40%
Department 4 (28,000/152,000) =25%
B. Calculation for the effect that would elimination of department 4 have had on total firm net income
First step is to find the Increase(Decrease) in overall net income
Using this formula
Increase(Decrease) in overall net income = Direct expenses - Gross profit
Let plug in the formula
Increase(Decrease) in overall net income= 27,000 - 38,000
Increase(Decrease) in overall net income= (11,000) decrease
Second step is to find the net operating income
Net operating income= 81,000 - 11,000
Net operating income= $70,000
Therefore the firm's net operating income would be $70,000
