Gulf Coast Fashions sells both designer and moderately priced women’s wear in Tampa. Profits have been volatile. Top management is trying to decide which product line to drop. Accountants have reported the following data:

The store has 8,000 square feet of floor space. If moderately priced goods are sold exclusively, 400 items can be displayed. If designer goods are sold exclusively, only 300 items can be displayed.

Moreover, the rate of sale (turnover) of the designer items will be two-thirds the rate of moderately priced goods.

1. Prepare an analysis to show which product to drop.

2. What other considerations might affect your decision in number 1?

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Per Item Designer $240 120 $120 Moderately Priced Average selling price Average variable expenses Average contribution margin Average contribution-margin percentage S150 85 S 65 50% 43%