23 HW 3 nformation Part 2 of 2 [The following information applies to the questio

Question

23 HW 3 nformation Part 2 of 2 [The following information applies to the questions displayed below. Suresh Co. expects its five departments to yield the following income for next year. 25 Dept. M Dept. NDept Sales Expenses $73,000 39,000 $66,000 $48,000 34,000 $260,000 40,00024,20017,000 16,200 Avoidable Unavoidable 54, 200 Total expenses 12,800 43,200 $137,200 ,000 $126, 200 67,00056,200 29,000 54, 000 57,200 263, 400 $37,000 s (6,000) s (23,200) s (3, 400) 4, 800 37, 000 14 Net income 6,000 (17,200) (loss) Recompute and prepare the departmental income statements (including a combined total column) for the company each of the following separate scenarios (2) Management eliminates departments with sales dollars that are less than avoidable expenses.

Explanation / Answer

Observation of given data indicates that, Department - N and Department - T are have dollar sales value lower than their avoidable expenses. Hence these two departments will be eliminated. When we eliminate a department, we will not get the sales revenue and at the same time we save the avoidable expenses. But Unavoidable expenses shall continue to incurred by company.

Dept. M Dept. N Dept.O Dept.P Dept.T Total Sales 73000 0 66000 48000 0 187000 Expenses Avaidable 12800 0 24200 17000 0 54000 Unavoidable 54200 16200 4800 37000 14000 126200 Total Expenses 67000 16200 29000 54000 14000 180200 Net Income / (Loss) 6000 -16200 37000 -6000 -14000 6800

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