a. In taking into account the Childrens Dept where Sales, Cost of Goods, Gross M

Question

a. In taking into account the Childrens Dept where
Sales, Cost of Goods, Gross Margin,Mgrs Salary, Comission what is the contribution oto profit and briefly state how this achieved.

b. Taking into account the Income statement what is the Company total of Met Income/Loss? And why?
c. If the childrens dept was eliminated to increase sales space for the other two depts..
Such as expanding lines to include adult boots which would generate income of $32000.
Would this decision affect the answer to A. If so explain.


Income Statements Mens Women Childrens
Sales 600K 420K 160K
Cost of Goods Sold (265,500) (176,400) (96,875)
Gross Margin 334,500 243,600 63,125
Mgr Salary (52K) (41K) (21K)
Sales Commission (106.2K) (75.6K) (27.9K)
Rent/Lease (21K) (21K) (21K)
Utilities (4K) (4K) (4K)
Net Inc/Loss 151.3K 102K 10,775

Explanation / Answer

a. Mens Women Children Total Sales - (A) 600000 420000 160000 1180000 Variable cost: Cost of goods sold 265500 176400 96875 538775 Sales commission 106200 75600 27900 209700 Manager salary 52000 41000 21000 114000 Total variable cost - (B) 423700 293000 145775 862475 Contribution - (C = A - B) 176300 127000 14225 317525 b. Mens Women Children Total Contribution - (C) 176300 127000 14225 317525 Fixed cost Rent/ Lease 21000 21000 21000 63000 Utilities 4000 4000 4000 12000 Total fixed cost - (D) 25000 25000 25000 75000 Net income / Loss (C - D) 151300 102000 -10775 242525 Company is getting total income of $242,525. c. If the childrens dept was eliminated to increase sales space for the other two depts..
Contribution margin will be changed. Because variable costs are not equal to all groups, these are vary to each. Thats why every thing will be change other than fixed cost. Thank you.... Mens Women Children Total Sales - (A) 600000 420000 160000 1180000 Variable cost: Cost of goods sold 265500 176400 96875 538775 Sales commission 106200 75600 27900 209700 Manager salary 52000 41000 21000 114000 Total variable cost - (B) 423700 293000 145775 862475 Contribution - (C = A - B) 176300 127000 14225 317525

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