Step 1: Identify departments with sales less than avoidable costs: From the information provided, we find that Department N and Department P have sales lower than their avoidable costs. Explanation: We examine the sales figures for each department and compare them with their respective avoidable costs. Departments where sales are lower than avoidable costs are identified. In this case, we find that Department N and Department P meet this criterion. Step 2: Departments with sales less than avoidable costs: Department N: Sales ($47,000) < Avoidable Costs ($48,400) Department P: Sales ($73,000) < Avoidable Costs ($24,000) Explanation: We list the departments identified in the previous step, specifying the sales and avoidable costs for each. This provides a clear understanding of which departments are generating less revenue than the costs they can potentially avoid. Step 3: Calculate income before elimination: For Department N: Income (Loss) = Sales - Total Expenses = $47,000 - $71,800 = ($26,000) For Department P: Income (Loss) = Sales - Total Expenses = $73,000 - $83,700 = ($10,700) Explanation: For each department identified in step 1, we calculate their income (or loss) before any elimination. This is done by subtracting the total expenses (sum of avoidable and unavoidable expenses) from the sales figure. In this case: For Department N: Sales ($47,000) - Total Expenses ($71,800) = ($26,000) (loss) For Department P: Sales ($73,000) - Total Expenses ($83,700) = ($10,700) (loss) Step 4: Total income before elimination: Total income before elimination = Income before elimination (Department N) + Income before elimination (Department P) Total income before elimination = ($26,000) + ($10,700) = ($36,700) Explanation: We sum up the incomes (or losses) calculated for the identified departments. This gives us the total income (or total loss) before any elimination takes place. In this case: Total income before elimination = ($26,000) + ($10,700) = ($36,700) Step 5: Calculate income after elimination: After eliminating Department N and P, their contribution to income becomes zero. Total increase in income: Total increase in income = Total income after elimination - Total income before elimination Total increase in income = $0 - ($36,700) = ($36,700) Explanation: To determine the total increase in income resulting from the elimination of the identified departments, we subtract the total income before elimination (step 4) from the total income after elimination (which is zero in this case, as calculated in step 5). This gives us the net change in income. In this case: Total increase in income = $0 - ($36,700) = ($36,700) Final Answer: So, the total increase in income, if the departments with sales less than avoidable costs are eliminated, is $36,700. Total increase in income $36,700

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