Consider Zena Fashion from S8-5. Assume once again that all fixed costs are unavoidable. If Zena Fashion 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 $47,000 of variable costs. Because the shoe business would be new to Zena Fashion, the company would have to incur an additional $7,100 of fixed costs (advertising, new shoe display racks, and so forth) per quarter related to the department. What should Zena Fashion do now?

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Department Men's Women's $54,000 28,000 21,000 Accessories Total Sales revenue Variable expenses. Fixed expenses. Total expenses $100000 $260,000 174,000 72,000 $113,000 $246,000 $(13,000) 14,000 $106,000 58,000 26,000 88,000 25,000 . $ 22,000 $ 5,000