On the basis of the following data, the general manager of Featherweight Shoes Inc. decided to discontinue
Question:
On the basis of the following data, the general manager of Featherweight Shoes Inc. decided to discontinue Children’s Shoes because it reduced income from operations by $ 17,000. What is the flaw in this decision, if it is assumed fixed costs would not be materially affected by thediscontinuance?
Transcribed Image Text:
Featherweight Shoes Inc. Product-Line Income Statement For the Year Ended April 30, 2014 Children's Shoes Men's Shoes Women's Shoes Sales Costs of goods sold: $235,000 $300,000 S500,0001,035,000 Variable costs Rxed costs Total cost of goods sold $130,000 41,000 $220,000 500,000 221,000 150,000 60,000 $210,000 120,000 340,000 721,000 $ 64000 90,000 $160000 314000 171,000 Gross profit Selling and adminstrative expenses Variable selling and admin. expenses ixed selling and admin, expenses Total selling and admin.expenses $ 46,000 35,000 $ 81,000 (17,000) 45,000 20,000 65,000 25,000 95,000 186,000 80,000 $120,000 266,000 $40000 48,000 25,000 Income (doss) from operations
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The flaw in the decision is the failure to focus on the differential re...View the full answer
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Related Book For
Financial and Managerial Accounting
ISBN: 978-1285078571
12th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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