should Amanda close the shoe division?

QUESTION 3 "Amanda has been guided by its founder's philosophy: offer the customer the best service, selection, quality and value." Amanda Philosophy Amanda Corporation is manufacturer of a high-end women's business apparel. It has three business divisions: clothing shoes, and accessories. While Amanda was pleased with the company's progress, she was concerned by the growing number of customer complaints and the decreasing sales. Information for the just concluded calendar year follows. Clothing Shoes Accessories (RM) (RM) (RM) Sales (8,000 units) 850,000 320,000 150,000 Less: Variable Costs 510,000 270,000 82,500 Fixed Costs 290,000 70,000 42,000 Total Cost 800,000 340,000 124,500 Operating Income/(Loss) 50,000 (20,000) 25,500 Amanda's management is considering closing the shoe division because of the loss and expanding the space that is currently devoted to accessories sales. A salaried salesperson in the shoe division who earns RM45,000 will be terminated; however, all other departmental fixed costs will continue to be incurred. Amanda will spend RM16,000 on remodeling costs and anticipates that accessories sales will increase by RM70,000. This additional sales revenue is expected to generate a 35% contribution margin for the firm. Finally, because clothing customers often purchased shoes and feel strongly about "one-stop shopping," clothing sales are expected to fall by 15% if the shoe division is closed. Required: 1. Should Amanda close the Shoe division? Justify your answer and show your calculations. (10 marks) 2. Assume that Amanda has continued the Shoe division. Several weeks ago, the company received a special-order inquiry from Yates, Inc. Yates desires to market a shoe similar to Amanda's and has offered to purchase 5,000 units. The following data are available: . Yates has offered Amanda special order price of RM35 because of the large quantity it is willing to purchase Yates requires a design modification that will allow a RM4 reduction in direct- material cost. Amanda's production supervisor notes that the company will incur RM6,000 in additional set-up costs and will have to purchase a RM3,300 special device to manufacture these units. The device will be discarded once the special order is completed. Should Amanda accept the special order? Justify your answer and show your calculations? (5 marks) 3. Suppose that after Amanda accepts the special order, it finds that unexpected production delays will not allow it to supply all 5,000 units from its own plants and meet the promised delivery date. Amanda's purchasing manager suggests providing the same type of shoe by purchasing them in bulk from competing firm. The shoe would then be labelled with Amanda's name to complete the order. However, as promised delivery date is approaching. Amanda does not have enough time to carefully test the competitor's product to determine its quality. What should Amanda do? Explain and include ethical viewpoint in your answer. (5 marks) 4. What are relevant costs? List at least four different decisions for which the relevant cost analysis model can be used effectively