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Gia Fashion operates three departments Men's, Women's, and Accessories. Departmental operating income data for the third quarter of the current year are as follows: (Click
Gia Fashion operates three departments Men's, Women's, and Accessories. Departmental operating income data for the third quarter of the current year are as follows: (Click the icon to view the data.) Assume that the fixed expenses assigned to each department include only direct foed costs of the department (rather than unavoidable fixed costs): Salary of the department's manager - Cost of advertising directly related to that department Gila Fashion discontinues a department, it will not incur these foxed expenses. Under these circumstances, should Gita Fashion discontinue any of the departments? Give your reason Contribution margin lost if Accessories is discontinued Less: Fixed cost savings i Accessories is discontinued Operating income Accessories is discontinued Under these circumstances, should Gila Fashion drop any of the departments? Decision: Gia Fashion Gila Fashions Product Line Contribution Margin Income Statement For the Year Product lines Men's Women's Accessories Sales revenue 110,000 $ 56,000 $ 102,000 $ Less: Variable expenses 62,000 28,000 91,000 Contribution margin 48,000 $ 28,000 $ 11,000 $ 26,000 20,000 Less: Fixed expenses 26,000 Company Total 268,000 181,000 87,000 72,000
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