Rooney Boot Co. sells mens, womens, and childrens boots. For each type of boot sold, it operates a separate department that has its own manager. All departments are housed in a single store. In recent years, the childrens department has operated at a net loss and is expected to continue to do so. Last years income statements follow.

	Mens Department				Womens Department				Childrens Department
Sales	$	690,000			$	510,000			$	210,000
Cost of goods sold		(272,000	)			(181,600	)			(103,375	)
Gross margin		418,000				328,400				106,625
Department managers salary		(65,000	)			(54,000	)			(34,000	)
Sales commissions		(119,200	)			(88,600	)			(34,400	)
Rent on store lease		(34,000	)			(34,000	)			(34,000	)
Store utilities		(17,000	)			(17,000	)			(17,000	)
Net income (loss)	$	182,800			$	134,800			$	(12,775	)

Required

1. a. Calculate the contribution to profit. Determine whether to eliminate the childrens department.

2. b-1. Calculate the net income for the company as a whole with the children's department.

3. b-2. Confirm the conclusion you reached in Requirement a by preparing income statements for the company without the childrens department.

4. c. Eliminating the childrens department would increase space available to display mens and womens boots. Suppose management estimates that a wider selection of adult boots would increase the stores net earnings by $45,000. Would this information affect the decision that you made in Requirement a?