10 11 points Exercise 9-8 Deciding Whether to Drop or Retain a Segment (LO1 - CC3) Your Retail Store's accountant prepared the following income statement for the ladies' accessories product line: Sales Less: Variable eBook $2,800,000 1,200,000 expenses Contribution 1,600,000 Reference margin Less: Fixed expenses: Wages $1,100,000 Insurance on 60,000 inventory Advertising 600,000 1,760,000 Net operating income (loss) $ (160,000) Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $80,000. Required: Calculate the increase or decrease in the operating income in both alternatives. Sales Fixed expenses Net operating income (loss) Keep Accesories Product Line Drop Accesories Product Line Should the shoe department be dropped? Yes No