Mila 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 Mila Fashion discontinues a department, it will not incur these fixed expenses. Under these circumstances, should Mila 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. Total Incremental Analysis for Discontinuation Decision Contribution margin lost if Accessories is discontinued Less: Fixed cost savings if Accessories is discontinued Operating income L i f Accessories is discontinued Under these circumstances, should Mila Fashion drop any of the departments? Decision: Mila Fashion should drop the Accessories Department should drop the Men's Department should drop the Women's Department should keep all the departments Data Table Mila Fashions Product Line Contribution Margin Income Statement For the Year Product lines Men's Women's Accessories Sales revenue 108,000 $ 55,000 $ 102,000 $ Less: Variable expenses 60,000 29,000 88,000 Contribution margin 48,000 $ 26,000 $ 14,000 $ Less: Fixed expenses 26,000 20,000 25,000 22,000 $ 6,000 $ (11,000) $ Operating income Company Total 265,000 177,000 88,000 71,000 17,000 Print Done