Question

Exercise 23-10 Analysis ot income ettects trom eliminating departments LO A1 The following information applies to the questions displayed below] Suresh Co. expects its five departments to yield the following income for next year, Dept. N $ 38,000 Dept. P $55,000 Dept. M $76,000 Total $275,000 Dept. 0 $69,000 Dept. $ 37,000 Sales Expenses Avoidable Unavoidable 45,900 16,10e 62,000 $(25,000) $141,800 $137,200 279,000 14,300 55,400 69,700 $ 6,300 41,800 18,000 59,800 $(21,800) 21,300 5,100 26,40e $42,600 18,500 42,680 61,100 $(6,100) Total expenses $ (4,000) Net income (loss) Recompute and prepare the departmental income statements (including a combined total column) for the company under each of the following separate scenarios. Exercise 23-10 Part 2 (2) Management eliminates departments with sales dollars that are less than avoidable expenses DEPARTMENTS WITH LESS SALES THAN AVOIDABLE EXPENSES ELIMINATED Dept. P Dept. T Dept. O Jotal Dept. N Dept. M Sales Expenses Avoidable Unavoidable Total expenses Net income (loss)

Answer 1

Ans. 2	DEPARTMENTS WITH LESS SALES THAN AVOIDABLE EXPENSES ELIMINATED
		Dept. M	Dept. N	Dept. O	Dept. P	Dept. T	Total
	Sales	$76,000		$69,000	55000		$200,000
	Expenses:
	Avoidable	-$14,300		-$21,300	-$18,500		-$54,100
	Unavoidable	-$55,400	-$18,000	-$5,100	-$42,600	-$16,100	-$137,200
	Total expenses	-$69,700	-$18,000	-$26,400	-$61,100	-$16,100	-$191,300
	Net income (loss)	$6,300	-$18,000	$42,600	-$6,100	-$16,100	$8,700
	*The sales dollar of Department N and Department T is less than the avoidable expenses.