Questions: Exercise 23-9 (Algo) Segment elimination LO P4 [The following information applies to the questions displayed below.] Suresh Company reports the following segment (department) income results for the year. Department M Department N Department O Department P Department T Total --------------------- Sales 88,000 46,000 84,000 72,000 45,000 335,000 Avoidable 19,300 47,800 18,800 23,500 54,900 164,300 Unavoidable 59,400 24,000 6,100 59,100 23,100 171,700 Total expenses 78,700 71,800 24,900 82,600 78,000 336,000 Income (loss) 9,300 (25,800) 59,100 (10,600) (33,000) (1,000) Exercise 23-9 (Algo) Part 2 b. Compute the total increase in income if the departments with sales less than avoidable costs, as identified in part a, are eliminated.

Solution Steps

To solve this problem, we need to identify the departments where the sales are less than the avoidable costs. These departments should be eliminated to compute the total increase in income. The increase in income is calculated by summing the avoidable costs of these departments since these costs will no longer be incurred.

1. Identify departments where sales are less than avoidable costs.
2. Sum the avoidable costs of these identified departments to find the total increase in income.

We need to find the departments where sales are less than avoidable costs. The relevant data is as follows:

• Department M: Sales = \( 88,000 \), Avoidable = \( 19,300 \)
• Department N: Sales = \( 46,000 \), Avoidable = \( 47,800 \)
• Department O: Sales = \( 84,000 \), Avoidable = \( 18,800 \)
• Department P: Sales = \( 72,000 \), Avoidable = \( 23,500 \)
• Department T: Sales = \( 45,000 \), Avoidable = \( 54,900 \)

The departments where sales are less than avoidable costs are:

• Department N: \( 46,000 < 47,800 \)
• Department T: \( 45,000 < 54,900 \)

Next, we sum the avoidable costs of the identified departments (N and T):

\[ \text{Total Increase} = \text{Avoidable}_N + \text{Avoidable}_T = 47,800 + 54,900 = 102,700 \]

Final Answer