A Company Expects Its Three Departments to Yield the Following

question 56

Essay

A company expects its three departments to yield the following income for next year:
$$\begin{array} { l r r r } & \text { Dept. X } & \text { Dept. Y } & \text { Dept. Z } \\\text { Sales } & \$ 94,000 & \$ 15,000 & \$ 70,000 \\\text { Expenses } & & & \\\text { Avoidable } & 71,000 & 2,000 & 52,000 \\ \text { Unavoidable } & \underline{4,000} & \underline{7,000} & \underline{20,000} \\\text { Total expenses }& \underline{75,000} & \underline{9,000} & \underline{72,000} \\\text {Net income (loss)}& \underline{\underline{\$ 19,000}} & \underline{\underline{\$ 6,000}} & \underline{\underline{\$ ( 2,000 )}}\end{array}$$
Required: Compute the following independent calculations:
a.The effect on total company income if Dept.X is eliminated.
b.The effect on total company income if Dept.Y is eliminated.
c.The effect on total company income if Dept.Z is eliminated.
d.Should any of these departments be eliminated? Why of why not?

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Definitions:

Price Change

A fluctuation in the cost of a good or service in the market.

Decrease in Quantity

A reduction in the amount or number of a particular good or service.

Supply Curve

a graphical representation showing the relationship between the price of a product and the amount of the product that producers are willing to supply.

Chili

A spicy stew containing chili peppers, meat (usually beef), and often tomatoes and beans. Other seasonings may also be included.