Question

Required information (The following information applies to the questions displayed below.] Suresh Co. expects its five departments to yield the following income for next year. Dept. M $74,000 Dept. N $40,000 Dept. o $67,000 Dept. P $50,000 Dept. T $ 35,000 Total $266,000 Sales Expenses Avoidable Unavoidable Total expenses Net income (loss) 13,300 54,600 67,900 $ 6,100 40,600 16,800 57,400 $(17,400) 23,000 4,900 27,900 $39,100 17,500 39,100 56,600 $(6,600) 44,100 14,700 58,800 $(23,800) 138,500 130,100 268,600 $ (2,600) Recompute and prepare the departmental income statements (including a combined total column) for the company under each of the following separate scenarios. (1) Management eliminates departments with expected net losses. DEPARTMENTS WITH EXPECTED NET LOSSES ELIMINATED Dept. M Dept. N Dept. o Dept. P D ept. I Total Sales Expenses: Avoidable Unavoidable Total expenses Net income (loss)

Answer 1

Particulars	M Dept	N Dept	O Dept	P Dept	T Dept	Total
Sales (a)	$74,000		67000	$50,000		$191,000
Expenses avoidable (b)	$13,300		$23,000	$17,500		$53,800
Expenses Unavoidable (c )	$54,600	$16,800	$4,900	$39,100	$14,700	$130,100
Total Expenses (B+C)	$67,900	$16,800	$27,900	$56,600	$14,700	$183,900
Net income (A-D)	$6,100	($16,800)	$39,100	($6,600)	($14,700)	$7,100

Management Should Elimate department N and Department T because Avoidable Expense is more than sales Value.