If any department is eliminated, only 60% of the fixed costs of that department

Question

If any department is eliminated, only 60% of the fixed costs of that department can be eliminated. Should Department N be dropped? Type in 1 for Drop the department and Type in 2 for Keep the department.

What is the difference in the net income between keeping Department N and dropping Department N?

If any department is eliminated, only 60% of the fixed costs of that department can be eliminated. Should Department P be dropped? Type in 1 for Drop the department and Type in 2 for Keep the department

What is the difference in net income between dropping Department P and keeping Department P?

If any department is eliminated, only 60% of the fixed costs of that department can be eliminated. Should Department T be dropped? Type in 1 for Drop the department and Type in 2 for Keep the department

What is the difference in net income between keeping Department T and dropping Department T?

Questions #5-$10 Suresh Company has the following information regarding its five departments Dept M Dept N Dept O Dept P Dept T Total Sales Varaiable Costs Contribution Margin Fixed Costs Net Income 31,50017,50028,00021,000 14,000 12,000 10,500 17,500 18,700 12,800 9,500 3,300 16,000 1,500 8,500 000) 18.00016,00079.200 3,000 3,700 700 8,400 (10,400) (2,000)32,800 33,300 500 14,300

Explanation / Answer

Difference in Net Income = $7,000 - $3,400

.........................................= $3,600

Differnce in Net Income = $1,480 - $700

........................................= $780

Difference in Net Income = $10,400 - $3,360

.........................................= $7,040

Department N Particulars Drop Keep Sales $17,500 $0 Variable Costs $16,000 $0 Contribution Margin $1,500 $0 Fixed Costs $8,500 $3,400 Net Income ($7,000) ($3,400) *Department N should be dropped.

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