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Gila 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
Gila 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 fixed costs of the department (rather than unavoidable fixed costs) Salary of the department's manager . Cost of advertising directly related to that department If Gila Fashion discontinues a department, it will not incur these fixed expenses. Under these circumstances, should Gila Fashion discontinue any of the departments? Give your reason. Complete the following analysis to determine the increase or decrease in operating income of dropping the Accessories Department, the only department showing an operating loss this quarter Incremental Analysis for Discontinuation Decision Total Contribution margin lost if Accessories is discontinued Less: Fixed cost savings if Accessories is discontinued Operating income Under these circumstances, should Gila Fashion drop any of the departments? Decision: Gila Fashiorn if Accessories is discontinued should drop the Accessories Department should drop the Men's Department should drop the Women's Department should keep all the departments Choose from any list o continue to the next
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