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4. On the basis of the following data, the general manager of Foremost Footwear Inc. decided to discontinue Childrens Shoes because it reduced income from
4. On the basis of the following data, the general manager of Foremost Footwear Inc. decided to discontinue Childrens Shoes because it reduced income from operations by $10,000. What is the flaw in this decision if it is assumed that fixed costs would not be materially affected by the discontinuance?
Children's Shoes $165,000 Total Men's Shoes $300,000 Women's Shoes $500,000 $965,000 Sales Costs of goods sold: Variable costs $105,000 $150,000 $220,000 $475,000 60,000 120,000 212,000 $210,000 $340,000 $687,000 $90,000 $160,000 $278,000 Fixed costs 32,000 Total cost of goods $137,000 sold Gross profit $28,000 Selling and adminstrative expenses: Variable selling and $21,000 admin. expenses Fixed selling and 17,000 admin. expenses Total selling and $38,000 admin. expenses Income (loss) from $(10,000) operations $45,000 $95,000 $161,000 20,000 25,000 62,000 $65,000 $120,000 $223,000 $25,000 $40,000 55,000 If the Children Shoe's are discontinued, the company's income would decrease by $Step by Step Solution
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