On the basis of the following data, the general manager of Featherweight Shoes Inc. decided to discontinue
Question:
On the basis of the following data, the general manager of Featherweight Shoes Inc. decided to discontinue Children's Shoes because it reduced income from operations by $17,000. What is the flaw in this decision, if it is assumed fixed costs would not be materially affected by the discontinuance?
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Featherweight Shoes Inc Product-Line Income Statement For the Year Ended April 30, 20Y8 Children's Shoes Men's Shoes Women's Shoes Total Sales $235,000 $300,000 $500,000 $1,035,000 Costs of goods sold Variable costs Fixed costs $130,000 41,000 $171,000 64,000 $150,000 60,000 $210,000 90,000 $220,000 500,000 221,000 $340,000 721,000 $160,000 314,000 120,000 Total cost of goods sold Gross profit Selling and adminstrative expenses 45,000 20,000 65,000 $ 25,000 Variable selg ad admin. expenses Fxed selling and admin. expenses 46,000 35,000 81,000 $ (17,000) 95,000 186,000 80,000 $120,000 266,000 40000 48,000 25,000 Total selling and admin. expenses Income (loss) from operations
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Related Book For
Financial And Managerial Accounting
ISBN: 9781337119207
14th Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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