can you help me solve this? Mila Fashion operates three departments. Men\'s. Wom

ID: 2525819 • Letter: C

Question

can you help me solve this?

Mila Fashion operates three departments. Men's. Women's, and Accessories. Departmental operating income data for the third quarter of the current year are as follows EEB (Click the icon to view the data.) Assume that the fixed expenses assigned to each department include only direct foxed costs of the department (rather than unavoidable fixed costs) .Salary of the department's manager Cost of advertising directly related to that department If Mia Fashion discontinues a department, it will not incur these foxed expenses Under these circumstances, should Mila Fashion discontinue any of the departments? Give your reason Complete the following analysis to determine the increase or decrease in operating income of dropping the Accessories Department, the only department showing an operating loss this quarter Incremental Analysis for Discontinuation Decision Total Cantribution margin lost if Accessories is discontinued Less: Fixed cost savings if Accessories is discontinued Operating income Under these circumstances, should Mla Fashion drop any of the departments? Decision Mila Fashion i Accessories is discontinued 6 Data Table Mila Fashions Product Line Contribution Margin Income Statement For the Year Product lines Men's Women'sAco Accessories Company Total 105 000 S 53 000 100 0co 250 o00 Sales revenue Less Variable expenses Contribution margin Less: Flxed expenses Operating income 105.000 53oo s 100, 000 5 61.000 30 000 88 000 12:000 s 44 000 S23000 S 26.000 9.000 71.000 21 000 24 000 18 000 S 2 000 $ 12 000s 8 000 Pint Done

Explanation / Answer

company’s total contribution margin

79000

contribution margin lost if accessories department is discontinue

-12000

less fixed cost savings if accessories department is discontinued

23000

operating income increase if accessories department is discontinued

11000

Yes she should drop accessories department