23 HW 3 nformation Part 2 of 2 The following information app

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.

Solution

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