Instructions:

On the basis of the following data, the general manager of Featherweight Shoes Inc. decided to discontinue Childrens Shoes because it reduced income from operations by $17,000.

Featherweight Shoes Inc.

Product-Line Income Statement

For the Year Ended April 30, 20Y8

1		Childrens Shoes	Mens Shoes	Womens 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

Differential Analysis:

Differential Analysis

Continue (Alternative 1) or Discontinue (Alternative 2) Childrens Shoes

1		Continue Childrens Shoes	Discontinue Childrens Shoes	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
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