Western 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	$	250,000			$	300,000			$	60,000
Cost of goods sold		(105,000	)			(125,000	)			(35,000	)
Gross margin		145,000				175,000				25,000
Department managers salary		(26,000	)			(30,000	)			(12,000	)
Sales commissions		(43,000	)			(49,000	)			(9,000	)
Rent on store lease		(10,500	)			(10,500	)			(10,500	)
Store utilities		(2,000	)			(2,000	)			(2,000	)
Net income (loss)	$	63,500			$	83,500			$	(8,500	)

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 $10,000. Would this information affect the decision that you made in Requirement a?