MA SX Sco Sca ch Co SCO SCD ch M SCO SM SMO M sy int as M SOL S Ga + > * File C:/Users/rhiti/Downloads/CW%20-%20Dropping%20a%20product.pdf G Gmail YouTube Maps !! Apus Ex4 Drop a Product PRODUCT LINE. Hambley's Toy Store is on Regent Street in London. It has a magic department near the main door. Management is considering dropping the magic department, which has consistently shown an operating loss. The pre- dicted income statements, in thousands of pounds (), follow (for ease of analy- sis, only three product lines are shown): GENERAL MERCHANDISE TOTAL 6,000 4,090 1,910 (32%) 5,000 3,500 1,500 (3.000) ELECTRONIC MAGIC PRODUCTS DEPARTMENT 400 600 200 390 200 A 210 (35%) Sales Variable expenses Contribution margin Fixed expenses (compensation, amortization, property taxes, insurance, etc.) Operating income 1,110 800 750 750 50 150 310 (100) The 310,000 of fixed expenses include the compensation of magic depart ment employees of 100.000. These employees will be released if the magic department is abandoned. All equipment is fully amortized, so none of the 310,000 pertains to such items. Furthermore, disposal values of the equipment will be exactly offset by the costs of removal and remodelling. If the magic department is dropped, the manager will use the vacated space for either more general merchandise or more electronic products. The expansion of general merchandise would not entail hiring any additional salaried help, but more electronic products would require an additional person at an annual cost of NO. The manager thinks that sales of general merchandise would increase by 300.000 electronic products, by $200.000. The manager's modest predic tions are partially based on the fact that she thinks the magic department has helped lure customers to the store and thus improved overall sales. If the magic department is closed, that lure would be gone. Should the magic department be closed? Explain, showing computations. General Electronics Magle CW - Dropping #....pat ch12 Limiting fact....adt ch12 Limiting fact....pot MA11 ch 12) LXX ....docx MA2-3 (ch2+])...docx Show all X Type here to search O I g ENG 11:52 PM 2020-06-13