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. Incremental Analysis for Discontinuation Decision Total Contribution margin lost if Accessories is discontinued Less: Fixed cost savings if Accessories is discontinued Operating income if Accessories is discontinued Under these circumstances, should Mila Fashion drop any of the departments? Decision: Mila Fashion Data Table A B D E 1 Mila Fashions 2 Product Line Contribution Margin Income Statement er. 3 For the Year 4 Product lines 5 Men's 6 Sales revenue $ 109,000 $ 58,000 Women's Accessories Company Total 55,000 $ 102,000 $ 266,000 31,000 89,000 178,000 7 Less: Variable expenses 8 Contribution margin $ 13,000 $ 51,000 $ 26,000 24,000 $ 20,000 88,000 72,000 9 Less: Fixed expenses 26,000 $ 25,000 $ 4,000 $ (13,000) $ 16,000 10 Operating income Print Done Complete the following erating income of dropping should drop the Accessories Department Incremental A Total Contribution margin los should drop the Men's Department Less: Fixed cost saving should drop the Women's Department Operating income should keep all the departments Under these circumstan is? Decision: Mila Fashion