1.TWU Clothing sells clothing, shoes, and accessories at a location in Denton, TX. Information for the just concluded calendar year follows.

ClothingShoesAccessories

Sales$850,000$320,000$150,000

Less: Variable costs$510,000$270,000$82,500

Fixed costs290,00070,00042,000

Total costs$800,000$340,000$124,500

Operating income (loss)$50,000$(20,000)$25,500

Management is considering closing the shoe operation because of the loss and expanding the space that is currently devoted to accessories sales. A salaried salesperson in the shoe department who earns $45,000 will be terminated; however, all other departmental fixed costs will continue to be incurred. TWU Clothing will spend $16,000 on remodeling costs and anticipates that accessories sales will increase by $70,000. This additional sales revenue is expected to generate a 35% contribution margin for the firm. Finally, because clothing customers often purchased shoes and feel strongly about "one-stop shopping," clothing sales are expected to fall by 15% if the shoe department is closed.

Required:

Your supervisor has asked you to determine whether the shoe department should be closed and the effect upon income if closed.