Exercise 23-10 Analysis of income effects from eliminating departments LO A1 [Th

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Exercise 23-10 Analysis of income effects from eliminating departments LO A1 [The following information applies to the questions displayed below.] 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 ) Recompute and prepare the departmental income statements (including a combined total column) for the company under each of the following separate scenarios. References Section BreakExercise 23-10 Analysis of income effects from eliminating departments LO A1 9.value: 1.66 pointsRequired information You did not receive credit for this question in a previous attempt Exercise 23-10 Part 1 (1) Management eliminates departments with expected net losses. ReferenceseBook & Resources WorksheetDifficulty: 2 Medium Exercise 23-10 Part 1Learning Objective: 23-A1 Evaluate short-term managerial decisions using relevant costs. Check my workPrevious attempt 10.value: 1.66 pointsRequired information You did not receive credit for this question in a previous attempt Exercise 23-10 Part 2 (2) Management eliminates departments with sales dollars that are less than avoidable expenses

Explanation / Answer

Department M N O P T Total Sales 63000 35000 56000 42000 28000 224000 Avoidable expenses 9800 36400 22400 14000 37800 120400 Unavoidable expenses 51800 12600 4200 29400 9800 107800 Net Income ( loss) 1400 -14000 29400 -1400 -19600 -4200 1) if management eliminates departments with expected losses, Department N, P & T will be eliminated M O Total Sales 63000 56000 119000 Avoidable expenses 9800 22400 32200 Unavoidable expenses 51800 4200 56000 Net Income ( loss) 1400 29400 30800 Net Income from Depratment M & O 30800 Less: Unavoidable cost of department N,P,T 51800 = 12600+29400+9800 Net Income ( loss) to business as whole -21000 2) If management eliminates department with sales dollar less then avoidable expenses Department N & T will be eliminated Department M O P Total Sales 63000 56000 42000 161000 Avoidable expenses 9800 22400 14000 46200 Unavoidable expenses 51800 4200 29400 85400 Net Income ( loss) 1400 29400 -1400 29400 Net Income from Depratment M , O , and P 29400 Less: Unavoidable cost of department N,,T 22400 = 12600+9800 Net Income ( loss) to business as whole 7000

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