A Company Expects Its Three Departments to Yield the Following

question 3

Essay

A company expects its three departments to yield the following income for next year:
$$\begin{array} { l r r r } & \text { Dept. O } & \text { Dept. K } & \text { Dept. W } \\\text { Sales } & \$ 92,000 & \$ 15,000 & \$ 87,000 \\\text { Expenses } & & & \\\text { Avoidable } & 73,000 & 1,000 & 3 6 , 0 0 0 \\\text { Unavoidable } &\underline{ 2,000 }& \underline{ 8 , 0 0 0 } & \underline{3 7 , 0 0 0 } \\\text { Total expenses } & \underline{75,000} & \underline{9,000 }& \underline{73,000} \\\text {Net income (loss)}& \mathbf { \underline{\$ 1 7 , 0 0 0 }} & \mathbf { \underline{\$ 6 , 0 0 0} } & \mathbf { \underline{\$ 1 4 , 0 0 0} }\end{array}$$
Required: Compute the following independent calculations:
a.The effect on total company income if Dept.O is eliminated.
b.The effect on total company income if Dept.K is eliminated.
c.The effect on total company income if Dept.W is eliminated.

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Definitions:

Principal-agent Problem

A dilemma in which one party (the agent) is expected to act in the best interest of another party (the principal) but may have the incentive to act in their own interest instead.

Shirking

The behavior of avoiding or evading work responsibilities, often in employment settings.

Industrial Unions

Labor unions that represent all types of workers within an entire industry, focusing on broad industry-level labor issues and negotiations.

Craft Unions

are labor unions that represent workers specialized in particular trades or crafts, focusing on securing favorable employment conditions and maintaining standards within their fields.