Vernon 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:

Required

1. a. Calculate the contribution margin. 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 as a whole with and 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 $49,000. Would this information affect the decision that you made in Requirement a?