Question

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

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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	)

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

Exercise 23-10 Part 1

(1) Management eliminates departments with expected net losses.

DEPARTMENTS WITH EXPECTED NET LOSSES ELIMINATED
	Dept. M	Dept. N	Dept. O	Dept. P	Dept. T	Total
Sales
Expenses:
Avoidable
Unavoidable
Total expenses
Net income (loss)

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

DEPARTMENTS WITH LESS SALES THAN AVOIDABLE EXPENSES ELIMINATED
	Dept. M	Dept. N	Dept. O	Dept. P	Dept. T	Total
Sales						$0
Expenses:
Avoidable						0
Unavoidable						0
Total expenses
Net income (loss)	$0	$0	$0	$0	$0	$0

Answer 1