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Prepare a differential analysis to determine the flaw in the general manager's decision. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon () will automatically appear if required. Differential Analysis Continue (Alternative 1) or Discontinue (Alternative 2) Children's Shoes Continue Discontinue Differential Effect Children's Shoes Children's Shoes on Income 2 (Alternative 1) (Alternative 2) (Alternative 2) 4 (Label) 5

Prepare a differential analysis to determine the flaw in the general manager's decision. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon () will automatically appear if required. Differential Analysis Continue (Alternative 1) or Discontinue (Alternative 2) Children's Shoes Continue Discontinue Differential Effect Children's Shoes Children's Shoes on Income 2 (Alternative 1) (Alternative 2) (Alternative 2) 4 (Label) 5

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter3: Cost Behavior
Section: Chapter Questions
Problem 26E: Starling Co. manufactures one product with a selling price of 18 and variable cost of 12. Starlings...
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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.
 
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Cash flows from investing activities  
Costs  
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Fixed costs  
Gain on sale of investments  
Income (loss)  
Loss on sale of investments  
Revenues  
Total costs  
Variable cost of goods sold  
Variable selling and administrative expenses
Featherweight Shoes Inc. Product-Line Income Statement For the Year Ended April 30, 20Y8 1 Children's Shoes Men's Shoes Women's Shoes Total 2 Sales $235,000.00 $300,000.00 $500,000.00 $1,035,000.00 3 Costs of goods sold: Variable costs $130,000.00 $150,000.00 $220,000.00 $500,000.00 4 Fixed costs 41,000.00 60,000.00 120,000.00 221,000.00 5 6 Total cost of goods sold $171,000.00 $210,000.00 $340,000.00 $721,000.00 7 Gross profit $64,000.00 $90,000.00 $160,000.00 $314,000.00 8 Selling and administrative expenses: Variable selling and admin. expenses $46,000.00 $45,000.00 $95,000.00 $186,000.00 10 Fixed selling and admin. expenses 35,000.00 20,000.00 25,000.00 80,000.00 11 Total selling and admin. expenses $81,000.00 $65,000.00 $120,000.00 $266,000.00 12 Income (loss) from operations $(17,000.00) $25,000.00 $40,000.00 $48,000.00 Required: What is the flaw in this decision, if it is assumed fixed costs would not be materially affected by the discontinuance? (Prepare the Differential Analysis before responding to the questions.)
Transcribed Image Text:Featherweight Shoes Inc. Product-Line Income Statement For the Year Ended April 30, 20Y8 1 Children's Shoes Men's Shoes Women's Shoes Total 2 Sales $235,000.00 $300,000.00 $500,000.00 $1,035,000.00 3 Costs of goods sold: Variable costs $130,000.00 $150,000.00 $220,000.00 $500,000.00 4 Fixed costs 41,000.00 60,000.00 120,000.00 221,000.00 5 6 Total cost of goods sold $171,000.00 $210,000.00 $340,000.00 $721,000.00 7 Gross profit $64,000.00 $90,000.00 $160,000.00 $314,000.00 8 Selling and administrative expenses: Variable selling and admin. expenses $46,000.00 $45,000.00 $95,000.00 $186,000.00 10 Fixed selling and admin. expenses 35,000.00 20,000.00 25,000.00 80,000.00 11 Total selling and admin. expenses $81,000.00 $65,000.00 $120,000.00 $266,000.00 12 Income (loss) from operations $(17,000.00) $25,000.00 $40,000.00 $48,000.00 Required: What is the flaw in this decision, if it is assumed fixed costs would not be materially affected by the discontinuance? (Prepare the Differential Analysis before responding to the questions.)
Prepare a differential analysis to determine the flaw in the general manager's decision. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. Differential Analysis Continue (Alternative 1) or Discontinue (Alternative 2) Children's Shoes Continue Discontinue Differential Effect 1 Children's Shoes Children's Shoes on Income (Alternative 1) (Alternative 2) (Alternative 2) 3 4 (Label) 5 6
Transcribed Image Text:Prepare a differential analysis to determine the flaw in the general manager's decision. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. Differential Analysis Continue (Alternative 1) or Discontinue (Alternative 2) Children's Shoes Continue Discontinue Differential Effect 1 Children's Shoes Children's Shoes on Income (Alternative 1) (Alternative 2) (Alternative 2) 3 4 (Label) 5 6
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Discontinuing operations for a product or a service line
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