Fashion store operates threedepartments: Men's,Women's, and Accessories.Knight Fashion allocates all fixed expenses(unavoidable building depreciation andutilities) based on the eachdepartment's floor space. IfKnight Fashion drops one of the currentdepartments, it plans to replace the dropped department with a Shoe Department. The company expects the Shoe Department to produce$80,000

in sales and$50,000 of variable costs. Because the shoe business would be new toKnight Fashion, the company would have to incur an additional$7,000 of fixed costs(advertising, new shoe displayracks, and soforth) per quarter related to the department. Departmental operating income data for the third quarter of the current year are asfollows:

Operating income data X Department Men's Women's Accessories Total Sales revenue . . . . . 105,000 $ 54,000 $ 100,000 $ 259,000 Variable expenses 60,000 30,000 80,000 170,000 Fixed expenses. . . . 25,000 30,000 25,000 80,000 Total expenses . . . 85,000 60,000 105,000 250,000 Operating income (loss) $ 20,000 $ (6,000) $ (5,000) $ 9,000Calculate the expected increase (decrease) in operating income by replacing a department with a Shoe Department. (Use parentheses or a minus sign to enter a decrease in operating income.) Knight Fashion Analysis of Replacing a Department with a Shoe Department Expected increase in revenues Expected increase in expenses: Variable expenses 170,000 Fixed expenses 80,000 Increase in total expenses Expected increase (decrease) in operating incomeCalculate the contribution margin of each of the existing departments. Department Contribution Margin Men's Department Women's Department Accessories Department Under these circumstances, should Knight Fashion drop any of the departments and replace it with a Shoe Department? Knight Fashion should consider