Thornton Boot Co. sells men's, women's, and children's boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men's department has a sales staff of nine employees, the manager of the women's department has six employees, and the manager of the children's department has three employees. All departments are housed in a single store. In recent years, the children's department has operated at a net loss and is expected to continue to do so. Last year's income statements follow. Sales Cost of goods sold Gross margin Department manager's salary Sales commissions Rent on store lease Store utilities Net income (loss) Men's Department $ 700,000 (273,500) 426,500 (68,000) (122,200) (37,000) (20,000) $ 179,300 Women's Department $ 500,000 (182,800) 317,200 (57,000) (91,600) (37,000) (20,000) $ 111,600 Children's Department $ 200,000 (104,875) 95,125 (37,000) (35,900) (37,000) (20,000) $ (34,775) 120,000) Required a. Calculate the contribution to profit. Determine whether to eliminate the children's 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 children's department. c. Eliminating the children's department would increase space available to display men's and women's boots. Suppose management estimates that a wider selection of adult boots would increase the store's net earnings by $48,000. 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 to profit. Determine whether to eliminate the children's department. Contribution to profit (loss) Should the children's department be eliminated? 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 a whole with the children's department. Net income (loss) Required A Required B2 > Complete this question by entering your answers in the tabs below. Required A Required B1 Required B2 Required C Eliminating the children's department would increase space available to display men's and women's boots. Suppose management estimates that a wider selection of adult boots would increase the store's net earnings by $48,000. Would this information affect the decision that you made in Requirement a? Will the decision made in Requirement a be affected? Required B2 Required c )
