On the basis of the following data, the general manager of Sandals Industries Inc. decided to discontinue
Question:
On the basis of the following data, the general manager of Sandals Industries Inc. decided to discontinue Children’s Sandals because it reduced income from operations by $65,000.
What is the flaw in thisdecision?
Transcribed Image Text:
Sandals Industries Inc. Product-Line Income Statement Women's Children's Sandals Men's Sandals Sandals Total Sales Costs of goods sold: 400,000 $1,200,000 $1,100,000 $2,700,000 Variable costs Fixed costs Total cost of goods sold $240,000 620,000 $ 580,000 $1,440,000 300,000 300,000 700,000 $340,000 S 920,000 880,000 $2,140,000 60,000 280,000 220,000 560,000 100,000 Gross profit Selling and administrative expenses: Variable selling and admin. expenses 75,000 20,000 100,000 S 295,000 230,000 Total selling and admin. expenses 125,000 220,000 180,000 525,000 (65000) 60,000S 40,000 S 35,000 Fixed selling and admin. expenses 50,000 100,000 80,000 Income (loss) from operation
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