Ex 12-5. See attached...

Exercise 12-5 Decision to discontinue a product On the basis of the following data, the general manager of Footwear Industries Inc. decided to discontinue Children's shoes because it reduced income from operations by $45,000. What is the flaw in this decision? Footwear Industries Inc. Product-Line Income Statement For the Year Ended May 31, 2012 Children's Shoes Sales Costs of goods sold: Variable costs Fixed costs Total cost of goods sold Gross Profit Selling and administrative expenses: Variable selling and admin expenses Fixed selling and admin expenses Total selling and admin expenses Income (loss) from operations Men's Shoes Women's Shoes Total $500,000 $800,000 $1,200,000 $2,500,000 $275,000 100,00 $375,000 $390,000 160,000 $550,000 $700,000 200,000 $900,000 $1,365,000 460,000 $1,825,000 $125,000 $250,000 $300,000 $675,000 $130,000 40,000 $170,000 ($45,000) $140,000 40,000 $180,000 $70,000 $160,000 50,000 $210,000 $90,000 $430,000 130,000 $560,000 $115,000