Problem 13-26A (Algo) Eliminating a segment LO 13.4 Stuart 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. 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, Men's Women's Children's Department Department Department Sales $ 710,000 $ 490,000 $ 210,000 Cost of goods sold (273,000) (182,400) (104,375) Gross margin 437,000 307,600 105,625 Department manager's salary (67,000) (56,000) (36,000 Sales commissions (121,200) (90,600) (35,400 Rent on store lease (36,000) (36,000) (36,000 Store utilities (19.000) (19,200) (19,000 Net income (loss) $ 193,800 $ 106,000 (20,775) Required a. Calculate the contribution to profit. 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 IN b-2. Confirm the conclusion you reached in Requirement aby 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 $47,000. Would this information affect the decision that you made in Requirement ? 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 $ 710,000 (273, ) . 437, eee (67,000) (121,200) (36,000) (19 , ) $ 193,800 Women's Department $ 49 , (182,400) 307,600 (56,000) (90,600) (36 , ) (19 , ) $ 106,000 Children's Department $ 210,000 (104,375) 105,625 (36,eee) (35,400) (36,000) (19,000) $ (20,775) Required A Required B1 Required B2 Required C Calculate the contribution to profit. Determine whether to eliminate Contribution to profit (loss) Should the children's department be eliminated? Required A Required B1 Required B2 Required c Calculate the net income for the company as a whole with the children's department. Net income (loss) Men's Women's Department Department Company Total Sales Cost of goods sold Gross margin Department manager's salary Sales commissions Rent on store lease Store utilities Net income (loss) 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 $47,000. Would this information affect the decision that you made in Requirement a? Will the decision made in Requirement a be affected