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:

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