Franklin Boot Co. sells mens, womens, and childrens boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the mens department has a sales staff of nine employees, the manager of the womens department has six employees, and the manager of the childrens department has three employees. 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	$	670,000			$	490,000			$	180,000
Cost of goods sold		(269,000	)			(179,200	)			(100,375	)
Gross margin		401,000				310,800				79,625
Department managers salary		(59,000	)			(48,000	)			(28,000	)
Sales commissions		(113,200	)			(82,600	)			(31,400	)
Rent on store lease		(28,000	)			(28,000	)			(28,000	)
Store utilities		(11,000	)			(11,000	)			(11,000	)
Net income (loss)	$	189,800			$	141,200			$	(18,775	)

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 as a whole with and 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 $39,000. Would this information affect the decision that you made in Requirement a?