Sales Costs of goods sold: Variable costs Fixed costs Total cost of goods sold Gross profit Selling and administrative expenses: Variable selling and admin. expenses Fixed selling and admin. expenses Total selling and admin. expenses Operating income (loss) Line Item Description Hawkeye Shoes Inc. Product-Line Income Statement For the Year Ended November 30, 20Y8 Children's Shoes Men's Shoes Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (loss) $280,000 $(135,000) (45,000) $(180,000) $100,000 $(100,000) (30,000) $(130,000) $(30,000) $300,000 $(150,000) (60,000) $(210,000) $90,000 $(45,000) (20,000) $(65,000) $25,000 Women's Shoes $500,000 0000 $(220,000) (120,000) $(340,000) $160,000 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 $(95,000) (25,000) $(120,000) $40,000 Total $1,080,000 $(505,000) (225,000) $(730,000) $350,000 $(240,000) (75,000) $(315,000) $35,000 Continue Children's Discontinue Children's Differential Effects Shoes (Alternative 1) Shoes (Alternative 2) (Alternative 2) b. What is the flaw in the decision to discontinue Children's Shoes, if it is assumed fixed costs would not be materially affected by the discontinuance?

Hawkeve Shoes Inc. Differential Analysis Continue (A1t,1) or Discontinue (Ait, 2) Chaldren's Shoes Nouenher 30 a. Prepare a differential analysis to determine the flaw in the general manager's decicion. If an amount is zero, enter " 0 ". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt, 1) or Discontinue (Mit. ) Children's Shoes