Mila Fashion in Pittsburgh operates three departments: Men's, Women's, and Accessories. (Click the icon to view additional information.) Departmental operating income data for the third quarter of the current year are as follows: (Click the icon to view the data.) What should the company do now? First, calculate the relevant operating income from the Shoe Department. Expected revenues Expected expenses: Mila Fashion Operating Income-Shoe Department Variable expenses Fixed expenses Total expected expenses Expected relevant operating income Next, let's calculate the contribution margin of the Shoe Department. Mila Fashion Product Line Contribution Margin Income Statement For the Year Product lines Men's Women's Accessories Shoes Sales revenue $ 115,000 $ 49,000 $ 99,000 62,000 26,000 86,000 Mila Fashion in Pittsburgh operates three departments: Men's, Women's, and Accessories. (Click the icon to view additional information.) Departmental operating income data for the third quarter of the cument year are as follows: (Click the loon to view the data) What should the company do now? Expected expenses Variable expenses Fixed expenses Total expected expenses Expected relevant operating income Next, let's calculate the contribution margin of the Shoe Department Mila Fashion Product Line Contribution Margin Income Statement For the Year Sales revenue Less variable expenses Contribution margin Men's Product lines Women's Accessories Shoes 115,000 $ 49,000 $ 99.000 62.000 26,000 86,000 53,000 23.000 13.000 Under these circumstances, should Mila Fashion drop any of the departments and replace it with a Shoe Department? The company should because Expected expenses: Variable expenses Fixed expenses Total expected expenses Expected relevant operating income Next, let's calculate the contribution margin of the Shoe Department. Mila Fashion Sales revenue Less variable expen Contribution margin Under these circumst The company should consider replacing the Accessories Department with a shoe department consider replacing the Men's Department with a shoe department consider replacing the Women's Department with a shoe department not consider replacing any department with a shoe department Department? because sasuada berating income contribution margin of the Shoe Department Mila Fashion Product Line Contribution Margin Income Statement For the Year Product lines Men's Women's Accessories Shoes $ 115,000 $ 40,000 $ 99,000 62,000 26,000 86.000 the Shoe Department has a higher contribution margin than the Accessories department but will incur higher fixed costs. the fixed cost savings would exceed the contribution margin lost from dropping this department 53,000 23,000 13.000 ces, should Mila Fashion drop any of the departments and replace it with a Shoe C the Shoe Department has a higher contribution margin than the Accessories department and thus is the better invest Mila Fashion in Ptsburgh operates three departments: Men's Women's, and Accessories. (Click the icon to view anditonal information) Departmental operating income data for the third quarter of the current year are as follows (Clek the icon to view the data) What should the company do now? Data table Expected expenses Variable expenses Fixed expenses Total expected expenses Expected re Next, let's ca Sales reven Less variab Contributio Under these More info Mila Fashion allocates all fixed expenses (unavoidable building depreciation and uities) based on each department's square footage. If the company discontinues one of the current departments, it plans to replace the discontinued department with a Shoe Departmant. The company expects the Shoe Department to produce $77,000 in sales and have $48,000 of variable costs Because the shoe business would be new to Mila Fashion, the company would have to incur an additional $7,500 of fixed costs (advertising new shoe display racks, and other fixed costs) per quarter related to the department. Print Done A 1 2 3 4 5 Sales revenue Mila Fashions Product Line Contribution Margin income Statement For the Year Product Men's Women's Accessories Company Total 115,000 $ 49,000 $ 99,000 $ 263.000 7 Less: Variable expenses 2,000 20,000 6.000 174.000 Contribution margin 53,000 1 23,000 $ 13000 $ 65.000 21,000 Less: Fixed expenses 21,000 20.000 2,000 $ 32.000 $ 2,000 $ (7000) 27.000 10 Operating income Print Done Data table A 1 B C D E X 2 3 4 5 Mila Fashions Product Line Contribution Margin Income Statement For the Year Product lines Men's Women's Accessories Company Total 6 Sales revenue $ 115,000 $ 49,000 $ 99,000 $ 263,000 7 Less: Variable expenses 62,000 26,000 86,000 174,000 8 Contribution margin $ 53,000 $ 23,000 $ 13,000 $ 89,000 21,000 21,000 20,000 62,000 9 Less: Fixed expenses $ 32,000 $ 2,000 $ (7,000) $ 27,000 10 Operating income Print Done