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EDNA FASHIONS Income Statement For the Quarter Ended September 30, 2018 Department Men's Accessories Women's 5 59,000 Total Net Sales Revenue $ 101,000 $ 102,000 $ 262,000 Variable Costs 65,000 35,000 91,000 191,000 Contribution Margin 36,000 24,000 11,000 71,000 Fixed Costs 27,000 19,000 29,000 75,000 Operating Income (Loss) $ 9,000 S 5,000 S (18,000) $ (4,000)

EDNA FASHIONS Income Statement For the Quarter Ended September 30, 2018 Department Men's Accessories Women's 5 59,000 Total Net Sales Revenue $ 101,000 $ 102,000 $ 262,000 Variable Costs 65,000 35,000 91,000 191,000 Contribution Margin 36,000 24,000 11,000 71,000 Fixed Costs 27,000 19,000 29,000 75,000 Operating Income (Loss) $ 9,000 S 5,000 S (18,000) $ (4,000)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Making dropping a product or segment decisions

Edna Fashions operates three departments: Men’s, Women’s and Accessories Depart mental operating income data for the third quarter of 2018 are as follows:

Assume that the fixed costs assigned to each department include only direct fixed costs of the department:

• Salary of the department’s manager

• Cost of advertising directly related to that department

If Edna Fashions drops a department, it will not incur these fixed costs Under these circumstances, should Edna Fashions drop any of the departments? Give your reasoning

EDNA FASHIONS Income Statement For the Quarter Ended September 30, 2018 Department Men's Accessories Women's 5 59,000 Total Net Sales Revenue $ 101,000 $ 102,000 $ 262,000 Variable Costs 65,000 35,000 91,000 191,000 Contribution Margin 36,000 24,000 11,000 71,000 Fixed Costs 27,000 19,000 29,000 75,000 Operating Income (Loss) $ 9,000 S 5,000 S (18,000) $ (4,000)
Transcribed Image Text:EDNA FASHIONS Income Statement For the Quarter Ended September 30, 2018 Department Men's Accessories Women's 5 59,000 Total Net Sales Revenue $ 101,000 $ 102,000 $ 262,000 Variable Costs 65,000 35,000 91,000 191,000 Contribution Margin 36,000 24,000 11,000 71,000 Fixed Costs 27,000 19,000 29,000 75,000 Operating Income (Loss) $ 9,000 S 5,000 S (18,000) $ (4,000)
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