- On the basis of the following data, the general manager of Hawkeye Shoes Inc. decided to discontinue Children's Shoes because it reduced operating income by $30,000. What is the flaw in this decision, if it is assumed fixed costs would not be materially affected by the discontinuance? Hawkeye Shoes Inc. Product-Line Income Statement For the Year Ended November 30, 20Y8 Children's Shoes Men's Shoes Women's Shoes $ 300,000 Total Sales $ 280,000 $ 500,000 $1,080,000 Costs of goods sold: $ (505,000) $(220,000) (120,000) $(340,000) $ 160,000 Variable costs $(135,000) $(150,000) Fixed costs Total cost of goods sold Gross profit Selling and adminstrative expenses: (45,000) $(180,000) $ 100,000 (60,000) $(210,000) $ 90,000 (225,000) $ (730,000) $ 350,000 $ (240,000) (75,000) $ (315,000) $ 35,000 $ (45,000) (20,000) $ (95,000) Variable selling and admin. expenses Fixed selling and admin. expenses Total selling and admin. expenses Operating income (loss) $(100,000) (30,000) (25,000) $(130,000) $ (30,000) $ (65,000) $ 25,000 $(120,000) $ 40,000
- On the basis of the following data, the general manager of Hawkeye Shoes Inc. decided to discontinue Children's Shoes because it reduced operating income by $30,000. What is the flaw in this decision, if it is assumed fixed costs would not be materially affected by the discontinuance? Hawkeye Shoes Inc. Product-Line Income Statement For the Year Ended November 30, 20Y8 Children's Shoes Men's Shoes Women's Shoes $ 300,000 Total Sales $ 280,000 $ 500,000 $1,080,000 Costs of goods sold: $ (505,000) $(220,000) (120,000) $(340,000) $ 160,000 Variable costs $(135,000) $(150,000) Fixed costs Total cost of goods sold Gross profit Selling and adminstrative expenses: (45,000) $(180,000) $ 100,000 (60,000) $(210,000) $ 90,000 (225,000) $ (730,000) $ 350,000 $ (240,000) (75,000) $ (315,000) $ 35,000 $ (45,000) (20,000) $ (95,000) Variable selling and admin. expenses Fixed selling and admin. expenses Total selling and admin. expenses Operating income (loss) $(100,000) (30,000) (25,000) $(130,000) $ (30,000) $ (65,000) $ 25,000 $(120,000) $ 40,000
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 6E
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