Decision to discontinue a product OBJ. 1 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 the discontinuance?

Featherweight Shoes Inc.

Product-Line Income Statement For the Year Ended April 30, 2016 Children’s Shoes Men’s Shoes Women’s Shoes Total Sales $235,000 $300,000 $500,000 $1,035,000 Costs of goods sold:

Variable costs $130,000 $150,000 $220,000 $ 500,000 Fixed costs 41,000 60,000 120,000 221,000 Total cost of goods sold $171,000 $210,000 $340,000 $ 721,000 Gross profit $ 64,000 $ 90,000 $160,000 $ 314,000 Selling and adminstrative expenses:

Variable selling and admin. expenses $ 46,000 $ 45,000 $ 95,000 $ 186,000 Fixed selling and admin. expenses 35,000 20,000 25,000 80,000 Total selling and admin. expenses $ 81,000 $ 65,000 $120,000 $ 266,000 Income (loss) from operations $ (17,000) $ 25,000 $ 40,000 $ 48,000