On the basis of the following data, the general manager of Sole Mates Inc. decided to discontinue
Question:
On the basis of the following data, the general manager of Sole Mates Inc. decided to discontinue Children's Shoes because it reduced income from operations by $28,000. What is the flaw in this decision?
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Sole Mates Inc. Product-Line Income Statement For the Year Ended August 31, 2010 Children's Shoes Men's Shoes Women's Shoes Total $300,000 $500,000 Sales $170,000 $970,000 Costs of goods sold: $220,000 120,000 $340,000 $160,000 $470,000 230,000 Variable costs $100,000 50,000 $150,000 $ 20,000 $150,000 60,000 $210,000 $ 90,000 Fixed costs $700,000 Total cost of goods sold Gross profit $270,000 Selling and adminstrative expenses: Variable selling and admin. expenses Fixed selling and admin. expenses Total selling and admin. expenses $ 30,000 18,000 $ 45,000 20,000 $ 95,000 25,000 $120,000 $170,000 63,000 $233,000 $ 37,000 $ 48,000 $ 65,000 $ 25,000 $ 40,000 Income (loss) from operations $(28,000)
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The flaw in the decision was the failure to focus on the diff...View the full answer
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Related Book For
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
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