Exercise 23-9 Analyzing income effects from eliminating departments LO P4 [The following information applies to the questions displayed below.] Suresh Co. expects its five departments to yield the following income for next year. Dept. M Sales $85,000 Dept. N $ 45,000 Dept. 0 $79,000 Dept. P $66,000 Dept. T $ 44,000 Total $319,000 Expenses Avoidable 17,800 46,000 19,300 22,000 52,200 157,300 Unavoidable 58,200 22,200 5,800 53,900 21,000 161,100 Total expenses 76,000 68,200 25,100 75,900 73,200 318,400 Net income (loss) $ 9,000 $(23,200) $53,900 $(9,900) $(29,200) $ (600) (1) Management eliminates departments with expected net losses. Sales Expenses: Avoidable Unavoidable DEPARTMENTS WITH EXPECTED NET LOSSES ELIMINATED Dept. M Dept. N Dept. O Dept. P Dept. T $ FA Total 0 0 0 Total expenses Net income (loss) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 (2) Management eliminates departments with sales dollars that are less than avoidable expenses. DEPARTMENTS WITH LESS SALES THAN AVOIDABLE EXPENSES ELIMINATED Dept. M Dept. N Dept. O Dept. P Dept. T Total $ EA 0 Sales Expenses: Avoidable Unavoidable 0 0 Total expenses Net income (loss) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is four units per hour. The machine's capacity is 2,400 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 4,080 units of Product TLX and 4,610 units of Product MTV. Selling prices and variable costs per unit to produce the products follow. $ per unit Selling price per unit Variable costs per unit Product TLX Product MTV $6.90 4.14 $11.50 3.45 Determine the company's most profitable sales mix and the contribution margin that results from that sales mix. (Round per unit contribution margins to 2 decimal places.) Contribution margin per unit Contribution margin per production hour Maximum number of units to be sold Hours required to produce maximum units Product TLX Product MTV Product TLX Product MTV Total 4,080 4,610 For Most Profitable Sales Mix Product TLX Product MTV Total Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin