Question: Consider Devine Fashion from S8-6. Assume that the fixed expenses assigned to each department include only direct fixed costs of the department (rather than unavoidable
In S8-6
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¢ Salary of the department's manager
¢ Cost of advertising directly related to that department
If Devine Fashion discontinues a department, it will not incur these fixed expenses. Under these circumstances, should Devine Fashion discontinue any of the departments? Give your reason.
Devine Fashions Product Line Contribution Margin Income Statement For the Year Product lines Company Total 258,000 176,000 Women's 52,000 28,000 Men's 105,000 58,000 47,000 25,000 22,000 Accessories Sales revenue Less: Variable expenses Contribution margin Less: Fixed expenses Operating income 101,000 24,000 22,000 2,000 11,000 26,000 (15,000) 82,000 73,000 9,000
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