09. CLOSE A DIVISION OR NOT More Fashion in New York operates 3 departments: Men's, Women's and Accessories. More Fashion allocates fixed expenses (rent and utilities) based on the square meters (m) occupied by each department. Departmental operating income data for 2013 are as follows: DEPARTMENT Men's Women's Accessories TOTAL Sales revenue $105.000 $54,000 $100.000 $252,000 Variable expenses $60,000 $30,000 $80,000 $170,000 Fixed expenses $25,000 $20,000 $25,000 $70,000 Total expenses $85,000 $50,000 $105,000 $240,000 Operating income/loss $20,000 $4,000 -$5,000 $19,000 Required: Answer the following questions given the independent assumptions: a) Assume that the store will remain in the same building regardless of whether any of the departments are closed or not and all fixed costs will continue to be incurred. Should More Fashion close any of the departments? Which department(s) if any? Give your reason and show necessary calculations. b) Assume that the fixed expenses of each department include only direct directly related with that department) fixed costs which are the salary of the department's manager and the cost of advertising directly related to that department. Under these circumstances, should More Fashion close any of the departments? Which department(s) if any? Give your reason. c) Assume that More Fashion allocates all fixed costs based on square meters. If More Fashion closes one of the current departments, it plans to replace it with Shoe Department. The company expects Shoe Department to produce $80.000 in sales and have $50,000 of variable costs. Because shoe business would be new, the company would have to incur an additional $7.000 of fixed costs (advertising, depreciation etc.) per period related to the department. What would More Fashion do now? Give your reason and show necessary calculations