Decision to Discontinue a Product On the basis of the following data, the general manager of Hawkeye Shoes Inc. decided to discontinue Children's Shoes because it reduced operating income by $30,000. Sales Costs of goods sold: Variable costs Hawkeye Shoes Inc. Product-Line Income Statement For the Year Ended November 30, 20YS Children's Shoes Men's Shoes Women's Shoes Total $280,000 $300,000 $500,000 $1,080,000 Fixed costs Total cost of goods sold Gross profit $(135,000) $(150,000) $(220,000) (45,000) (60,000) $(180,000) $(210,000) $(505,000) (120,000) (225,000) $(340,000) $(730,000) $100,000 $90,000 $160,000 $350,000 Selling and administrative expenses: Variable selling and admin, expenses $(100,000) $(45,000) $(95,000) $(240,000) Fixed selling and admin. expenses (30,000) Total selling and admin. expenses $(130,000) Operating income (loss) $(30,000) (20,000) $(65,000) $25,000 (25,000) (75,000) $(120,000) $(315,000) $40,000 $35,000 a. Prepare a differential analysis to determine the flaw in the general manager's decision. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Children's Shoes November 30 Continue Discontinue Children's Shoes Children's Shoes (Alternative 1) Differential (Alternative 2) Effects (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) 0000 b. What is the flaw in the decision to discontinue Children's Shoes, if it is assumed fixed costs would not be materially affected by the discontinuance? If the children's Shoes are discontinued, the company's loss would by 5