Finch Boot Co. sells mens, womens, and childrens boots. For each type of boot sold, it operates a separate department that has its own manager. All departments are housed in a single store. In recent years, the childrens department has operated at a net loss and is expected to continue to do so. Last years income statements follow.

	Mens Department				Womens Department				Childrens Department
Sales	$	660,000			$	480,000			$	170,000
Cost of goods sold		(268,500	)			(178,800	)			(99,875	)
Gross margin		391,500				301,200				70,125
Department managers salary		(58,000	)			(47,000	)			(27,000	)
Sales commissions		(112,200	)			(81,600	)			(30,900	)
Rent on store lease		(27,000	)			(27,000	)			(27,000	)
Store utilities		(10,000	)			(10,000	)			(10,000	)
Net income (loss)	$	184,300			$	135,600			$	(24,775	)

Required

1. a. Calculate the contribution to profit. Determine whether to eliminate the childrens department.

2. b-1. Calculate the net income for the company as a whole with the children's department.

3. b-2. Confirm the conclusion you reached in Requirement a by preparing income statements for the company without the childrens department.

4. c. Eliminating the childrens department would increase space available to display mens and womens boots. Suppose management estimates that a wider selection of adult boots would increase the stores net earnings by $38,000. Would this information affect the decision that you made in Requirement a?