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)	$	$	$

b. What is the flaw in the decision to discontinue Childrens Shoes, if it is assumed fixed costs would not be materially affected by the discontinuance?

If the childrens Shoes are discontinued, the company's would by $.