Decision to Discontinue a Product

On the basis of the following data, the general manager of Featherweight Shoes Inc. decided to discontinue Children's Shoes because it reduced income from operations by $17,000.

Featherweight Shoes Inc. Product-Line Income Statement For the Year Ended April 30, 20Y8
	Children's Shoes			Men's Shoes			Women's Shoes			Total
Sales		$235,000			$300,000			$500,000		$1,035,000
Costs of goods sold:
Variable costs	$130,000	$150,000	$220,000	$500,000
Fixed costs	41,000	60,000	120,000	221,000
Total cost of goods sold	$171,000	$210,000	$340,000	$721,000
Gross profit	$64,000	$90,000	$160,000	$314,000
Selling and administrative expenses:
Variable selling and admin. expenses	$46,000	$45,000	$95,000	$186,000
Fixed selling and admin. expenses	35,000	20,000	25,000	80,000
Total selling and admin. expenses	$81,000	$65,000	$120,000	$266,000
Income (Loss) from operations	$(17,000)	$25,000	$40,000	$48,000

a. Prepare a differential analysis to determine the flaw in the general managers decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss.

Differential Analysis
Continue (Alternative 1) or Discontinue (Alternative 2) Childrens Shoes
	Continue Children's Shoes (Alternative 1)	Discontinue Children's Shoes (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs:
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Income (Loss)	$	$	$