West Coast Fashions sells both designer and moderately priced women’s wear in Vancouver. 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 metres 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 requirement 1?

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PER ITEM MODERATELY PRICED Average selling price DESIGNER $240 $150 Average variable expenses 120 85 Average contribution margin $120 $ 65 Average contribution-margin percentage 50% 43%