Decision to Discontinue a Product On the basis of the following data, the general manager of...

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Decision to Discontinue a Product On the basis of the following data, the general manager of Foremost Footwear Inc. decided t Foremost Footwear Inc. Product-Line Income Statement For the Year Ended April 30, 2047 Childrens Mens Womens Shoes Shoes S

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Answer 1

Answer #1

Children's Shoe
	Present Scenario	If Discontinued	Increase (decrease)
Sales	$ 1,65,000	$ -	$ -1,65,000
Variable cost ($105000 + $21000)	$ 1,26,000	$ -	$ -1,26,000
Contribution Margin	$ 39,000	$ -	$ -39,000
Fixed cost ($32000 + $17000)	$ 49,000	$ 49,000	$ -
Income (loss)	$ -10,000	$-49,000	$ -39,000

Note: Fixed cost will exist even if the Children's shoe segment discontinued as it is not affected by the discontinuance

If the Children's shoes are discontinued the company's profit would decrease by $39,000

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Answer 2

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