Consider Devine Fashion from S8-6. Assume that the fixed expenses assigned to each department include only direct fixed costs of the department (rather than unavoidable fixed costs as given in S8-6):
In S8-6

€¢ Salary of the department's manager
€¢ Cost of advertising directly related to that department
If Devine Fashion discontinues a department, it will not incur these fixed expenses. Under these circumstances, should Devine Fashion discontinue any of the departments? Give your reason.

Transcribed Image Text:

Devine Fashions Product Line Contribution Margin Income Statement For the Year Product lines Company Total 258,000 176,000 Women's 52,000 28,000 Men's 105,000 58,000 47,000 25,000 22,000 Accessories Sales revenue Less: Variable expenses Contribution margin Less: Fixed expenses Operating income 101,000 24,000 22,000 2,000 11,000 26,000 (15,000) 82,000 73,000 9,000