Question

Suresh Co expects its five departments to yield the following income for next year

Answer 1

Answer and Explanation:

The preparation is presented below

1.

Particulars       Dept. M   Dept N    Dept O   Dept P     Dept T    Total

Sales               $35,500     0        $33,500        0              0       $102,000

Expenses    

Avoidable       $4,400        0       $ 10,700         0            0           $23,100

Unavoidable   $19,000   $7,200 $2,700     $16,000 $4,100      $49,000

Total

expenses       $23,400    $7,200  $13,400  ($16,000)  ($4,100)    $72,100

Net income

(loss)               $12,100     ($7,200) $22,100  ($16,000) ($4,100)  $29,900

As we can see that department N, P and T are suffering from losses so these are closed

2. Department N and T had fewer sales dollars than avoidable costs, and certain units will be dropped. Yet there will always be unavoidable costs to incur.

Particulars       Dept. M   Dept N    Dept O   Dept P     Dept T    Total

Sales               $35,500     0        $33,500    $33,000      0         $102,000

Expenses    

Avoidable       $4,400        0       $ 10,700    $8,000       0           $23,100

Unavoidable   $19,000   $7,200 $2,700     $16,000 $4,100      $49,000

Total

expenses       $23,400    $7,200  $13,400  $24,000  $4,100    $72,100

Net income

(loss)             $12,100     ($7,200) $22,100  $9,000    ($4,100)  $29,900