On the basis of the following data, the general manager of Featherweight Shoes Inc. decided to discontinue Childrens Shoes because it reduced income from operations by $17,000.

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

Featherweight Shoes Inc.

Product-Line Income Statement

For the Year Ended April 30, 2016

1		Childrens Shoes	Mens Shoes	Womens Shoes	Total
2	Sales	$235,000.00	$300,000.00	$500,000.00	$1,035,000.00
3	Costs of goods sold:
4	Variable costs	$130,000.00	$150,000.00	$220,000.00	$500,000.00
5	Fixed costs	41,000.00	60,000.00	120,000.00	221,000.00
6	Total cost of goods sold	$171,000.00	$210,000.00	$340,000.00	$721,000.00
7	Gross profit	$64,000.00	$90,000.00	$160,000.00	$314,000.00
8	Selling and adminstrative expenses:
9	Variable selling and admin. expenses	$46,000.00	$45,000.00	$95,000.00	$186,000.00
10	Fixed selling and admin. expenses	35,000.00	20,000.00	25,000.00	80,000.00
11	Total selling and admin. expenses	$81,000.00	$65,000.00	$120,000.00	$266,000.00
12	Income (loss) from operations	$(17,000.00)	$25,000.00	$40,000.00	$48,000.00

Differential Analysis

Continue (Alternative 1) or Discontinue (Alternative 2) Childrens Shoes

April 30, 2016

1		Continue Childrens Shoes	Discontinue Childrens Shoes	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
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If the children Shoe's are discontinued, the company's income would decrease by ____________