Decision to Discontinue a Product On the basis of the following data, the genera
ID: 2535766 • Letter: D
Question
Decision to Discontinue a Product
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.
If the children Shoe's are discontinued, the company's would by $.
Featherweight Shoes Inc.Product-Line Income Statement
For the Year Ended April 30, 2016 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 $130,000 $150,000 $220,000 $500,000 Fixed costs 41,000 60,000 120,000 221,000 Total cost of goods sold $171,000 $210,000 $340,000 $721,000 Gross profit $64,000 $90,000 $160,000 $314,000 Selling and adminstrative expenses: Variable selling and admin. expenses $46,000 $45,000 $95,000 $186,000 Fixed selling and admin. expenses 35,000 20,000 25,000 80,000 Total selling and admin. expenses $81,000 $65,000 $120,000 $266,000 Income (loss) from operations $(17,000) $25,000 $40,000 $48,000
Explanation / Answer
Continue Children’s Shoes Discontinue Children’s Shoes Differential Effect on Income Revenues 235000 0 -235000 Costs: Variable cost of goods sold -130000 0 130000 Variable selling and administrative expenses -46000 0 46000 Fixed costs -76000 -76000 0 Income (loss) -17000 -76000 -59000 If the children Shoe's are discontinued, the company's profit would decrease by $59000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.