On the basis of the following data, the general manager of Sole Mates Inc. decided to discontinue
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On the basis of the following data, the general manager of Sole Mates Inc. decided to discontinue Children's Shoes because it reduced income from operations by $28,000. What is the flaw in thisdecision?
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Sole Mates Inc. Product-Line Income Statement For the Year Ended August 31,2010 Children's Men's Women's Shoes Shoes Shoes Total Sales $170,000 $300,000 5500,000 $970,000 Costs of goods sold: Variable costs $100,000 50,000 $150,000 $210,000 $340,000 $700,000 $ 20,000 $ 90,000 S160,000 $270,000 $150,000 $220,000 $470,000 Fixed costs 60,000 120,000 230,000 Total cost of goods sold Gross profit Selling and administrative expenses: Variable selling and admin. expenses Fixed selling and admin. expenses Total selling and admin. expenses Income (loss) from operations $ 30,000 18,000 $ 48,000 $(28,000) $ 45,000 $ 95,000 $170,000 25,000 $ 65,000 $120,000 $ 25,000 $ 40,000 20,000 63,000 $233,000 $ 37,000
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