a. Calculate the contribution margin. Determine whether to eliminate the children's department.

b-1. Calculate the net income for the company as a whole with the children's department.

b-2. Confirm the conclusion you reached in Requirement a by preparing income statements for the company without the children's department.

c. Eliminating the children's department would increase space available to display men's and women's boots. Suppose management estimates that a wider selection of adult boots would increase the store's net earnings by $50,000. Would this information affect the decision that you made in Requirement a?

Walton Boot Co. sells men's, women's, and children's boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men's department has a sales staff of nine employees, the manager of the women's department has six employees, and the manager of the children's department has three employees. All departments are housed in a single store. In recent years, the children's department has operated at a net loss and is expected to continue to do so. Last year's income statements follow: Sales Cost of goods sold Gross margin Department manager's salary Sales commissions Rent on store lease Store utilities Net income (loss) Men's Department $ 720,000 (274,500) 445,500 (70,000) (124, 200) (39,000) (22,000) $ 190, 300 Women's Department 500,000 (183,600) 316,400 (59,000) (93,600) (39,000) (22,000) 102,800 $ $ $ $ Children's Department 220,000 (105,875) 114, 125 (39,000) (36,900) (39,000) (22,000) (22,775)