Question
Rundle Boot Co. sells mens, womens, and childrens boots. For each type of boot sold, it operates a separate department that has its own manager.
Rundle Boot Co. sells mens, womens, and childrens boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the mens department has a sales staff of nine employees, the manager of the womens department has six employees, and the manager of the childrens department has three employees. 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 | $ | 700,000 | $ | 500,000 | $ | 200,000 | |||||
Cost of goods sold | (271,500 | ) | (181,200 | ) | (102,875 | ) | |||||
Gross margin | 428,500 | 318,800 | 97,125 | ||||||||
Department managers salary | (64,000 | ) | (53,000 | ) | (33,000 | ) | |||||
Sales commissions | (118,200 | ) | (87,600 | ) | (33,900 | ) | |||||
Rent on store lease | (33,000 | ) | (33,000 | ) | (33,000 | ) | |||||
Store utilities | (16,000 | ) | (16,000 | ) | (16,000 | ) | |||||
Net income (loss) | $ | 197,300 | $ | 129,200 | $ | (18,775 | ) | ||||
Required
a. Calculate the contribution margin. Determine whether to eliminate the childrens department.
b-1. Calculate the net income for the company as a whole with the children's department.
b-2. Confirm the conclusion you reached in Requirement a by preparing income statements for the company as a whole with and without the childrens department.
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 $44,000. Would this information affect the decision that you made in Requirement a?
Complete this question by entering your answers in the tabs below.
Required A
Required B1
Required B2
Required C
Calculate the contribution margin. Determine whether to eliminate the childrens department. (Negative amounts should be indicated by a minus sign.)
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Complete this question by entering your answers in the tabs below.
Required A
Required B1
Required B2
Required C
Calculate the net income for the company as the whole with the children's department.
|
Complete this question by entering your answers in the tabs below.
Required A
Required B1
Required B2
Required C
Confirm the conclusion you reached in Requirement a by preparing income statements for the company as a whole with and without the childrens department.
|
Complete this question by entering your answers in the tabs below.
Required A
Required B1
Required B2
Required 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 $44,000. Would this information affect the decision that you made in Requirement a?
|
Please show work and answer in this format.
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