Instructions On the basis of the following data, the general manager of Featherweight Shoes Inc. decided to discontinue Children's Shoes because it reduced income from operations by $17,000. Featherweight Shoes Inc. Product-Line Income Statement For the Year Ended April 30, 20Y8 Children's Shoes Men's Shoes Women's Shoes Total 2 Sales $235,000.00 $300,000.00 $500,000.00 $1,035,000.00 3 Costs of goods sold: 4 Variable costs $130,000.00 $150,000.00 $220,000.00 $500,000.00 5 Fixed costs 41,000.00 60,000.00 120,000.00 221,000.00 6 Total cost of goods sold $171,000.00 $210,000.00 $340,000.00 $721,000.00 7 Gross profit $64,000.00 $90,000.00 $160,000.00 $314,000.00 8 Selling and administrative expenses: 9 Variable selling and admin. expenses $46,000.00 $45,000.00 $95,000.00 $186,000.00 10 Fixed selling and admin. expenses 35,000.00 20.000.00 25,000.00 80,000.00 11 Total selling and admin. expenses $81,000.00 $65,000.00 $120,000.00 $266,000.00 12 Income (Loss) from operations $(17,000.00) $25,000.00 $40,000.00 $48,000.00 Required: What is the flaw in this decision, if it is assumed fixed costs would not be materially affected by the discontinuance? (Prepare the Differential Analysis before responding to the questions.) Labels and Amount Descriptions Labels Cash flows from investing activities Costs Amount Descriptions Fixed costs Gain on sale of investments Income (loss) Loss on sale of investments Revenues Total costs Variable cost of goods sold Variable selling and administrative expenses Differential Analysis Prepare a differential analysis to determine the flaw in the general manager's decision. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "O". A colon (1) will automatically appear if required Differential Analysis Continue (Alternative 1) or Discontinue (Alternative 2) Children's Shoes Continue Differential Effect 1 Discontinue Children's Shoes Children's Shoes on Income 2 (Alternative 1) (Alternative 2) (Alternative 2) 3 4 (Label) 5 6 7 8 Questions What is the flaw in the decision to discontinue Children's Shoes, if it is assumed fixed costs would not be materially affected by the discontinuance? The general manager has failed to identify the objective of the decision. The general manager uses only fixed costs to make the decision. The general manager is not focusing on the differential revenues and costs. If the Children's Shoes are discontinued, the company's would