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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

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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, 2018 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 $(220,000) $(505,000) $(135,000) (45,000) $(180,000) $(150,000) (60,000) Fixed costs (120,000) (225,000) Total cost of goods sold $(210,000) $(340,000) $(730,000) Gross profit $100,000 $90,000 $160,000 $350,000 $(100,000) $(45,000) $(95,000) $(240,000) Selling and administrative expenses: Variable selling and admin. expenses Fixed selling and admin. expenses Total selling and admin. expenses (30,000) (20,000) (25,000) (75,000) $(130,000) $(65,000) $(120,000) $(315,000) Operating income (loss) $(30,000) $25,000 $40,000 $35,000 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 Discontinue Children's Shoes Children's Shoes (Alternative 1) (Alternative 2) Differential Effects (Alternative 2) Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs 1100 Profit (Loss)

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