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 $63,000 $35,000 $56,000 $42,000 $28,000 $224,000
Expenses Avoidable 9,800 36,400 22,400 14,000 37,800 $120,400
Unavoidable 51,800 12,600 4,200 29,400 9,800 $107,800
Total expenses 61,600 49,000 26,600 43,400 47,600 228,200
Net income (loss) $1,400 $(14,000 ) $29,400 $(1,400 ) $(19,600 ) $(4,200 )

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

Answer and Explanation:

The re-computation and prepare the departmental income statements is shown below:-

Department N and T has sales dollar lower than Avoidable expenses, therefore those department will be eliminated. Also Unavoidable expenses will be occurs.

Department with less sales than avoidable expenses eliminated

Dept M Dept N Dept O Dept P Dept T Total

Sales $63,000 $0 $56,000 $42,000 $0 $161,000

Expenses

Avoidable: $9,800 $0 $22,400 $14,000 $0 $46,200

Unavoidable $51,800 $12,600 $4,200 $29,400 $9,800 $107,800

Total

expenses $61,600 $12,600 $26,600 $43,400 $9,800 $107,800

Net income

(loss) $1,400 ($12,600) $29,400 ($1,400) ($9,800) $7,000