On the basis of the following data, the general manager of Hawkeye Shoes Inc. decided to discontinue Children$$s Shoes because it reduced operating income by $$30,000.$

Hawkeye Shoes Inc.

Product$-$Line Income Statement

For the Year Ended November $30,20$Y$8$

Children's Shoes Men's Shoes Women's Shoes Total

Sales $$280,000$ $$300,000$ $$500,000$ $$1,080,000$

Costs of goods sold:

Variable costs $$(135,000)$ $$(150,000)$ $$(220,000)$ $$(505,000)$

Fixed costs $(45,000)(60,000)(120,000)(225,000)$

Total cost of goods sold $$(180,000)$ $$(210,000)$ $$(340,000)$ $$(730,000)$

Gross profit $$100,000$ $$90,000$ $$160,000$ $$350,000$

Selling and administrative expenses:

Variable selling and admin. expenses $$(100,000)$ $$(45,000)$ $$(95,000)$ $$(240,000)$

Fixed selling and admin. expenses $(30,000)(20,000)(25,000)(75,000)$

Total selling and admin. expenses $$(130,000)$ $$(65,000)$ $$(120,000)$ $$(315,000)$

Operating income $($loss$)$ $$(30,000)$ $$25,000$ $$40,000$ $$35,000$

Question Content Area

a$.$ Prepare a differential analysis to determine the flaw in the general manager$$s decision. If an amount is zero, enter $"0".$ If required, use a minus sign to indicate a loss.

Differential Analysis

Continue $($Alt$.1)$ or Discontinue $($Alt$.2)$ Children$$s Shoes

November $30$

Continue

Children's Shoes

$($Alternative $1)$ Discontinue

Children's Shoes

$($Alternative $2)$

Differential

Effects

$($Alternative $2)$

Revenues $fill in the blank daeaf$9005023047\_1$

$fill in the blank daeaf$9005023047\_2$

$fill in the blank daeaf$9005023047\_3$

Costs:

Variable cost of goods sold fill in the blank daeaf$9005023047\_4$

fill in the blank daeaf$9005023047\_5$

fill in the blank daeaf$9005023047\_6$

Variable selling and admin. expenses fill in the blank daeaf$9005023047\_7$

fill in the blank daeaf$9005023047\_8$

fill in the blank daeaf$9005023047\_9$

Fixed costs fill in the blank daeaf$9005023047\_10$

fill in the blank daeaf$9005023047\_11$

fill in the blank daeaf$9005023047\_12$

Profit $($Loss$)$ $fill in the blank daeaf$9005023047\_13$

$fill in the blank daeaf$9005023047\_14$

$fill in the blank daeaf$9005023047\_15$

Question Content Area

b$.$ What is the flaw in the decision to discontinue Children$$s Shoes, if it is assumed fixed costs would not be materially affected by the discontinuance?

If the children$$s Shoes are discontinued, the company's loss would

by $fill in the blank $21648$ef$6$cf$9$b$03$c$\_3$

$.$