Question

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 $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)

Required:
Recompute and prepare the departmental income statements (including a combined total column) for the company under each of the following separate scenarios.

Answer 1

Question Completion:

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

Answer:

Suresh Co.

Departmental Income Statements

Dept. M Dept. O Dept. P Total

Sales $82,000 $78,000 $65,000 $225,000

Expenses

Avoidable 17,300 18,000 21,500 $56,800

Unavoidable 57,800 5,700 54,300 $159,700

Total expenses 75,100 23,700 75,800 216,500

Net income (loss) $6,900 $54,300 $(10,800) $8,500

Step-by-step explanation:

a) Data and Calculations:

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)

b) The unavoidable expenses will not change when the two departments have been eliminated. This is why the total unavoidable expenses and the total net income do not tally with the departmental unavoidable and net income sums.