Suresh Co. expects its five departments to yield the following income for next y

Question

Suresh Co. expects its five departments to yield the following income for next year.

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.

(2) Management eliminates departments with sales dollars that are less than avoidable expenses.

Calculate the total change in net income if Alternative A is adopted. (Cash outflows should be indicated by a minus sign.)

Calculate the total change in net income if Alternative B is adopted. (Cash outflows should be indicated by a minus sign.)

Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase?

Dept. M Dept. N Dept. O Dept. P Dept. T Total Sales $ 82,000 $ 44,000 $ 78,000 $ 65,000 $ 43,000 $ 312,000 Expenses Avoidable 17,300 45,400 18,000 21,500 51,300 $ 153,500 Unavoidable 57,800 21,600 5,700 54,300 20,300 $ 159,700 Total expenses 75,100 67,000 23,700 75,800 71,600 313,200 Net income (loss) $ 6,900 $ (23,000 ) $ 54,300 $ (10,800 ) $ (28,600 ) $ (1,200 )

Explanation / Answer

Solution 1:

Solution 2:

Note: I have answered all parts related to first question. Other parts are pretaining to different question for which information is not available.

DEPARTMENTS WITH EXPECTED NET LOSSES ELIMINATED Dept. M Dept. N Dept. O Dept. P Dept. T Total Sales $82,000.00 $0.00 $78,000.00 $0.00 $0.00 $160,000.00 Expenses: Avoidable $17,300.00 $0.00 $18,000.00 $0.00 $0.00 $35,300.00 Unavoidable $57,800.00 $21,600.00 $5,700.00 $54,300.00 $20,300.00 $159,700.00 Total expenses $75,100.00 $21,600.00 $23,700.00 $54,300.00 $20,300.00 $195,000.00 Net income (loss) $6,900.00 -$21,600.00 $54,300.00 -$54,300.00 -$20,300.00 -$35,000.00

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