Question
Your Retail Store's accountant has prepared the following income statement for the women's accessories product line: Sales $ 3.100.000 Minus: variable expenses 1.457.000 Contribution margin
Your Retail Store's accountant has prepared the following income statement for the women's accessories product line:
Sales | $ | 3.100.000 | ||||
Minus: variable expenses | 1.457.000 | |||||
Contribution margin | 1.643.000 | |||||
Minus: Fixed expenses: | ||||||
fees | $ | 1.116.000 | ||||
Inventory insurance | 62.000 | |||||
advertising | 682.000 | 1.860.000 | ||||
Net operating income (loss) | $ | (217.000 | ) | |||
Management is concerned about loss and is considering downsizing its product range. If the product line is dropped, a job must be created elsewhere for a long-term employee currently earning an annual salary of $93,000. |
Necessary:
Calculate the increase or decrease in operating income for both alternatives.
Should women's accessories product group be left?
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Introduction to Managerial Accounting
Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan
5th Canadian edition
77429494, 1259105709, 1260480798, 978-1259105708
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