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. Hawkeye Shoes Inc.Product-Line Income StatementFor the Year Ended November 30, 20Y8 Children's Shoes Men's Shoes Women's Shoes Total Sales $280,000 300,000 $500,000 $1,080,000 Costs of goods sold: Variable costs $(135,000) $(150,000) $(220,000) $(505,000) Fixed costs (45,000) (60,000) (120,000) (225,000) Total cost of goods sold $(180,000) $(210,000) $(340,000) $(730,000) Gross profit $100,000 $90,000 $160,000 $350,000 Selling and administrative expenses: Variable selling and admin. expenses $(100,000) $(45,000) $(95,000) $(240,000) Fixed selling and admin. expenses (30,000) (20,000) (25,000) (75,000) Total selling and admin. expenses $(130,000) $(65,000) $(120,000) $(315,000) Operating income (loss) $(30,000) $25,000 $40,000 $35,000 a. Prepare a differential analysis to determine the flaw in the general manager’s decision. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
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. Hawkeye Shoes Inc.Product-Line Income StatementFor the Year Ended November 30, 20Y8 Children's Shoes Men's Shoes Women's Shoes Total Sales $280,000 300,000 $500,000 $1,080,000 Costs of goods sold: Variable costs $(135,000) $(150,000) $(220,000) $(505,000) Fixed costs (45,000) (60,000) (120,000) (225,000) Total cost of goods sold $(180,000) $(210,000) $(340,000) $(730,000) Gross profit $100,000 $90,000 $160,000 $350,000 Selling and administrative expenses: Variable selling and admin. expenses $(100,000) $(45,000) $(95,000) $(240,000) Fixed selling and admin. expenses (30,000) (20,000) (25,000) (75,000) Total selling and admin. expenses $(130,000) $(65,000) $(120,000) $(315,000) Operating income (loss) $(30,000) $25,000 $40,000 $35,000 a. Prepare a differential analysis to determine the flaw in the general manager’s decision. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
| Hawkeye Shoes Inc. Product-Line Income Statement For the Year Ended November 30, 20Y8 |
||||||||||
| Children's Shoes | Men's Shoes | Women's Shoes | Total | |||||||
| Sales | $280,000 | 300,000 | $500,000 | $1,080,000 | ||||||
| Costs of goods sold: | ||||||||||
| Variable costs | $(135,000) | $(150,000) | $(220,000) | $(505,000) | ||||||
| Fixed costs | (45,000) | (60,000) | (120,000) | (225,000) | ||||||
| Total cost of goods sold | $(180,000) | $(210,000) | $(340,000) | $(730,000) | ||||||
| Gross profit | $100,000 | $90,000 | $160,000 | $350,000 | ||||||
| Selling and administrative expenses: | ||||||||||
| Variable selling and admin. expenses | $(100,000) | $(45,000) | $(95,000) | $(240,000) | ||||||
| Fixed selling and admin. expenses | (30,000) | (20,000) | (25,000) | (75,000) | ||||||
| Total selling and admin. expenses | $(130,000) | $(65,000) | $(120,000) | $(315,000) | ||||||
| Operating income (loss) | $(30,000) | $25,000 | $40,000 | $35,000 |
a. Prepare a differential analysis to determine the flaw in the general manager’s decision. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
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