Consider Knight Fashion from S8-5. Assume that the fixed expenses assigned to each department include only direct fixed costs of the department (rather than unavoidable fixed costs as given in S8-5):
In S

–  Salary of the department€™s manager
–  Cost of advertising directly related to that department
If Knight Fashion drops a department, it will not incur these fixed expenses. Under these circumstances, should Knight Fashion drop any of the departments? Give your reason.

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Department Men's Women's Accessories Total $105,000 $54,000 $100,000 $259,000 Sales revenue. Variable expenses. Fixed expenses Total expenses. Operating income (loss) 60,000 30,000 80,000 170,000 25,000 20,000 25,000 70,000 5,000 50,000 105,000 240,000 $20,000 4,000 (5,000) $19,000