question archive Emily has produced the following income statement for the ladies' shoe department of a large department store: Sales $1,500,000 Less: variable expense 700,000 Contribution margin 800,000 Less: fixed expenses: Wages $550,000 Insurance on inventory 20,000 Advertising 200,000 770,000 Net operating income $ 30,000 Compared with other departments, the ladies' shoe department has poor profitability
Emily has produced the following income statement for the ladies' shoe department of a large department store: Sales $1,500,000 Less: variable expense 700,000 Contribution margin 800,000 Less: fixed expenses: Wages $550,000 Insurance on inventory 20,000 Advertising 200,000 770,000 Net operating income $ 30,000 Compared with other departments, the ladies' shoe department has poor profitability
Subject:AccountingPrice: Bought3
Emily has produced the following income statement for the ladies' shoe department of a large department store:
Sales $1,500,000
Less: variable expense 700,000
Contribution margin 800,000
Less: fixed expenses:
Wages $550,000
Insurance on inventory 20,000
Advertising 200,000 770,000
Net operating income $ 30,000
Compared with other departments, the ladies' shoe department has poor profitability. Management is considering dropping the department entirely. If the department is dropped, a job has to be created elsewhere for one employee who has been with the firm for many years. This employee has an annual salary of $40,000 and many years until retirement.
Required:
Prepare an analysis to determine whether the ladies' shoe department should be dropped, and make a recommendation to management about this decision.
