On the basis of the following data, the general manager of Foremost Footwear Inc decided to discontinue Childrens Shoes because it reduced income from operations by $10,000 What is the flaw in this decision if it is assumed that fixed costs would not be materially affected by the discontinuance (Prepare the Differential Analysis before responding to the questions ) Foremost Footwear Inc Product Line Income Statement For the Year Ended April 30, 20Y7 1 Childrens Shoes Mens Shoes Womens Shoes Total 2 Sales $165,000 00 $300,000 00 $500,000 00 $965,000 00 3 Costs of goods sold 4 Variable costs $105,000 00 $150,000 00 $220,000 00 $475,000 00 5 Fixed costs 32,000 00 60,000 00 120,000 00 212,000 00 6 Total cost of goods sold $137,000 00 $210,000 00 $340,000 00 $687,000 00 7 Gross profit $28,000 00 $90,000 00 $160,000 00 $278,000 00 8 Selling and adminstrative expenses 9 Variable selling and admin expenses $21,000 00 $45,000 00 $95,000 00 $161,000 00 10 Fixed selling and admin expenses 17,000 00 20,000 00 25,000 00 62,000 00 11 Total selling and admin expenses $38,000 00 $65,000 00 $120,000 00 $223,000 00 12 Income (loss) from operations $(10,000 00) $25,000 00 $40,000 00 $55,000 00 Differential Analysis Shaded cells have feedback Prepare a differential analysis to determine the flaw in the general managers decision Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries For those boxes in which you must enter subtracted or negative numbers use a minus sign If there is no amount or an amount is zero, enter 0 A colon ( ) will automatically appear if required Differential Analysis Score 62 89 Continue (Alternative 1) or Discontinue (Alternative 2) Children's Shoes April 30, 2017 Continue Discontinue Differential Effect 1 Children's Shoes Children's Shoes on Income 2 (Alternative 1) (Alternative 2) (Alternative 2) 3 Revenues $165,000 00 $0 00 $(165,000 00) 4 Costs 5 Variable cost of goods sold 0 00 6 Variable selling and administrative expenses 0 00 7 Fixed costs 0 00 8 Income (Loss)

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On the basis of the following data, the general manager of Foremost Footwear Inc. decided to discontinue Childrens Shoes because it reduced income from operations

On the basis of the following data, the general manager of Foremost Footwear Inc. decided to discontinue Childrens Shoes because it reduced income from operations by $10,000.

What is the flaw in this decision if it is assumed that fixed costs would not be materially affected by the discontinuance? (Prepare the Differential Analysis before responding to the questions.)

Foremost Footwear Inc.

Product-Line Income Statement

For the Year Ended April 30, 20Y7

1		Childrens Shoes	Mens Shoes	Womens Shoes	Total
2	Sales	$165,000.00	$300,000.00	$500,000.00	$965,000.00
3	Costs of goods sold:
4	Variable costs	$105,000.00	$150,000.00	$220,000.00	$475,000.00
5	Fixed costs	32,000.00	60,000.00	120,000.00	212,000.00
6	Total cost of goods sold	$137,000.00	$210,000.00	$340,000.00	$687,000.00
7	Gross profit	$28,000.00	$90,000.00	$160,000.00	$278,000.00
8	Selling and adminstrative expenses:
9	Variable selling and admin. expenses	$21,000.00	$45,000.00	$95,000.00	$161,000.00
10	Fixed selling and admin. expenses	17,000.00	20,000.00	25,000.00	62,000.00
11	Total selling and admin. expenses	$38,000.00	$65,000.00	$120,000.00	$223,000.00
12	Income (loss) from operations	$(10,000.00)	$25,000.00	$40,000.00	$55,000.00

Differential Analysis

Shaded cells have feedback.

Prepare a differential analysis to determine the flaw in the general managers decision. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. image text in transcribed

Differential Analysis Score: 62/89 Continue (Alternative 1) or Discontinue (Alternative 2) Children's Shoes April 30, 2017 Continue Discontinue Differential Effect 1 Children's Shoes Children's Shoes on Income 2. (Alternative 1) (Alternative 2) (Alternative 2) 3 Revenues $165,000.00 $0.00 $(165,000.00) 4 Costs: 5 Variable cost of goods sold 0.00 6 Variable selling and administrative expenses 0.00 7 Fixed costs 0.00 8 Income (Loss)