(L.OBJ. 3) Making dropping a product and product-mix decisions [5—10 min] Linda Fashion...

(L.OBJ. 3) Making dropping a product and product-mix decisions [5—10 min]

Linda Fashions operates three departments: Men’s, Women’s, and Accessories. Departmental operating income data for the third quarter of 2011 are as follows:

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

. Salary of the department’s manager

. Cost of advertising directly related to that department

If Linda Fashions drops a department, it will not incur these fixed expenses.

Requirement

1. Under these circumstances, should Linda Fashions drop any of the departments? Give your reasoning.