- X More info Zena Fashion allocates all fixed expenses (unavoidable building depreciation and utilities) based on each department's square footage. If the company discontinues one of the current departments, it plans to replace the discontinued department with a Shoe Department. The company expects the Shoe Department to produce $77,000 in sales and have $53,000 of variable costs. Because the shoe business would be new to Zena Fashion, the company would have to incur an additional $7,300 of fixed costs (advertising, new shoe display racks, and other fixed costs) per quarter related to the department. Print Done uala LEDIU B D E 1 Zena Fashions 2 Product Line Contribution Margin Income Statement For the Year 3 4 5 4 Product lines 6 Sales revenue $ Men's 108,000 $ 62,000 Women's Accessories Company Total 58,000 $ 99,000 $ 265,000 31,000 94,000 187,000 7 Less: Variable expenses 8 Contribution margin $ 46,000 $ 23,000 27,000 $ 21,000 5,000 $ 28,000 78,000 72,000 9 Less: Fixed expenses $ 23,000 $ 6,000 $ (23,000) $ 6,000 10 Operating income Zena Fashion in Pittsburgh operates three departments: Men's, Women's, and Accessories. Click the icon to view additional information.) Departmental operating income data for the third quarter of the current year are as follows: E (Click the icon to view the data.) What should the company do now? First, calculate the relevant operating income from the Shoe Department Zena Fashion Operating Income-Shoe Department Expected revenues Expected expenses: 53000 Variable expenses 77000 Fixed expenses Total expected expenses Expected relevant operating income