Betty€™s Grocery Store has three departments€”meat, canned food, and produce€”each of which has its own manager. All departments are housed in a single store. Recently, the produce department has been suffering a net loss and is expected to continue doing so. Last year€™s income statements follow.

Required
a. Determine whether to eliminate the produce department.
b. Confirm the conclusion you reached in Requirement a by preparing a before and an after income statement, assuming that the produce department is eliminated.
c. Eliminating the produce department would allow the meat department to expand. It could add seafood to its products. Suppose that management estimates that offering seafood would increase the store€™s net earnings by $160,000. Would this information affect the decision that you made in Requirement a? Explain youranswer.

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Canned Food Department $640,000 380,000) 260,000 (30,000) (80,000) (20,000) Produce Department $ 475,000 295,000) 180,000 (35,000) (80,000) (20,000) Meat Department 9 2 Sales Cost of goods sold Gross margin Departmental manager's salary Rent on store lease Store utlities Other general expenses Net income (loss) 700,000 (320,000) 380,000 (42,000) (80,000) (20,000) (98,000) S 140,000 32,000 S (53,000)