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Required information: Analyzing income effects from eliminating departments.
Suresh Co. expects its five departments to yield the following income for next year.
Dept. M Dept. N Dept. O Dept. P Dept. T Total
Sales $66,000 $38,000 $59,000 $45,000 $31,000 $239,000
Expenses
Avoidable 11,300 38,200 23,300 15,500 40,500 128,800
Unavoidable 53,000 14,400 4,500 31,200 11,900 115,000
Total expenses 64,300 52,600 27,800 46,700 52,400 243,800
Net income (loss) $1,700 $(14,600) $31,200 $(1,700) $(21,400) $(4,800)
Re-compute 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 sales dollars that are less than avoidable expenses.
2) Management eliminates departments with expected net losses.

Sagot :

Answer and Explanation:

The computation and the preparation is presented below:

1.

Particulars  Dept. M    Dept. N    Dept. O     Dept. P      Dept. T     Total

Sales           $66,000                    $59,000     $45,000                    $170,000

Expenses

Avoidable    $11,300                     $23,300       $15,500                     $50,100

Unavoidable  $53,000   $14,400  $4,500       $31,200    $11,900    $115,000

Total expense $64,300   $14,400   $27,800    $46,700   $11,900   $165,100

Net income

or loss             $1,700          -$14,400   $31,200  -$1,700  -$11,900  $4,900

2.

Particulars  Dept. M    Dept. N    Dept. O     Dept. P      Dept. T     Total

Sales           $66,000                    $59,000                                     $125000

Expenses

Avoidable    $11,300                     $23,300                                     $34,600

Unavoidable  $53,000   $14,400  $4,500       $31,200    $11,900    $115,000

Total expense $64,300   $14,400   $27,800    $31,200   $11,900   $149,600

Net income

or loss             $1,700          -$14,400   $31,200  -$31,200 -$11,900  -$24,600

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