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Data Table - X Gila Fashions Product Line Contribution Margin Income Statement For the Year Product lines Men's Women's Accessories $ 110,000 $ 54,000 $
Data Table - X Gila Fashions Product Line Contribution Margin Income Statement For the Year Product lines Men's Women's Accessories $ 110,000 $ 54,000 $ 101,000 $ 58,000 31,000 89.000 Sales revenue Company Total 265,000 178,000 Less: Variable expenses Contribution margin 52,000 $ 26,000 23,000 $ 20,000 12,000 $ 26,000 Less: Fixed expenses 87,000 72,000 15,000 $ 26,000 $ 3,000 $ (14,000) $ Operating income Print Done Gila Fashion operates three departments: Men's, Women's, and Accessories. Departmental operating income data for the third quarter of the current year are as follows: (Click the icon to view the data.) Assume that the fixed expenses assigned to each department include only direct fixed costs of the department (rather than unavoidable fixed costs): Salary of the department's manager Cost of advertising directly related to that department If Gila Fashion discontinues a department, it will not incur these fixed expenses. Under these circumstances, should Gila Fashion discontinue any of the departments? Give your reason. Complete the following analysis to determine the increase or decrease in operating income of dropping the Accessories Department, the only department showing an operating loss this quarter. Incremental Analysis for Discontinuation Decision Total Contribution margin lost if Accessories is discontinued Less: Fixed cost savings if Accessories is discontinued Operating income if Accessories is discontinued
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