Question

Required information Exercise 23-10 Analysis of income effects from 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. M $81,000 Dept. N $ 43,000 Dept. o $77,000 Dept. P $62,000 Dept. 1 $ 42,000 Total $305,000 Sales Expenses Avoidable Unavoidable Total expenses Net income (loss) 16,800 57,400 74,200 $ 6,800 44,800 21,000 65,800 $(22,800) 20.600 5,600 26,200 $50,800 21.000 50,800 71,00 $(9,800) 50,400 19,600 70,000 $(28,000) $153,600 $154,400 308,000 $ (3,000) 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 1 (1) Management eliminates departments with expected net losses. DEPARTMENTS WITH EXPECTED NET LOSSES ELIMINATED Dept. M Dept. N D ept. O Dept. P D ept. T Total Sales Expenses: Avoidable Unavoidable Total expenses Net income (loss)

Answer 1

Dept P Dept T Total $158,000.00 (1) Management Eliminates Departments with expected net losses Department with Expected Net losses Eliminated |Dept Dept N Dept o Sales $ 81,000.00 $ 77,000.00 Expenses : Avoidable $ 16,800.00 $ 20,600.00 Unavoidable $ 57,400.00 $ 21,000.00 $ 5,600.00 Total Expenses $ 74,200.00 $ 21,000.00 $ 26,200.00 Net income/(loss) $ 6,800.00 $ (21,000.00) $ 50,800.00 $ 37,400.00 $ 50,800.00 $ 19,600.00 $ 154,400.00 $ 50,800.00 $ 19,600.00 $191,800.00 $ (50,800.00) $ (19,600.00) $ (33,800.00) Note : Even Though departments are eliminated Unavoidable fixed costs are relevant they cant be eliminated