Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Decision to Discontinue a Product On the basis of the following data, the general manager of Foremost Footwear Inc. decided to discontinue Childrens Shoes because

Decision to Discontinue a Product

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?

Foremost Footwear Inc. Product-Line Income Statement For the Year Ended April 30, 20Y7
Children's Shoes Men's Shoes Women's Shoes Total
Sales $165,000 $300,000 $500,000 $965,000
Costs of goods sold:
Variable costs $105,000 $150,000 $220,000 $475,000
Fixed costs 32,000 60,000 120,000 212,000
Total cost of goods sold $137,000 $210,000 $340,000 $687,000
Gross profit $28,000 $90,000 $160,000 $278,000
Selling and adminstrative expenses:
Variable selling and admin. expenses $21,000 $45,000 $95,000 $161,000
Fixed selling and admin. expenses 17,000 20,000 25,000 62,000
Total selling and admin. expenses $38,000 $65,000 $120,000 $223,000
Income (loss) from operations $(10,000) $25,000 $40,000 55,000

If the Children Shoe's are discontinued, the company's income would decrease by $.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Brain Audit Why Customers Buy And Why They Dont

Authors: Sean D'Souza, John Forde

1st Edition

0473175045, 978-0473175047

More Books

Students also viewed these Accounting questions

Question

=+30. Recorded cash fees earned, $3,400.

Answered: 1 week ago

Question

Connect with your audience

Answered: 1 week ago