More Info Gila Fashion in Charlotte 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? ? Expected revenues Expected expenses: Variable expenses Gila Fashion allocates all fixed expenses (unavoidable building depreciation and utilities) 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 Department. The company expects the Shoe Department to produce 585,000 in sales and have $49,000 of variable costs. Because the shoe business would be new to Gila Fashion, the company would have to incur an additional 56,900 of fixed costs (actvorlising, now shoe display racks, and other fixed costs) per quarter related to the department. II Fixed expenses Total expected expenses i Data Table Expected relevant operating income Next, let's calculate the contribution margin of the Shoe Department. A B C D | E E 1 Gila Fashion Product Line Contribution Margin Income Statement For the Year 2 Gila Fashions Product Line Contribution Margin Income Statement For the Year 3 Product lines 4 Product lines Shoes 5 5 Men's Company Total Sales revenue $ Men's 110.000 $ 54.000 Women's 56.000 $ 26,000 Accessories 104,000 91,000 6 Sales revenue S 110,000 $ 54,000 Women's Accessories 56,000 $ 104,000 S 26,000 91.000 270,000 171,000 Less variable expenses Contribution margin 56.000 30,000 13,000 7 Less: Variable expenses 8 Contribution margin 9 Less: Fixed expenses S 56,000 $ 26,000 30,000 $ 23,000 13,000 S 20.000 99,000 69,000 Under these circumstances, should Gila Fashion drop any of the departments and replace it with a Shoe Department? The company should S 30,000 $ because 7,000 $ (7,000) S 30,000 10 Operating income Enter any number in the edit fields and then continue to the next question. Print Done