chilhas its own manager. The manager of the men's department has a sales staff of nine employees, the manager of the women'sdepartment has six employees, and the manager of the children's department has three employees. All departments are housed in asingle store. In recent years, the children's department has operated at a net loss and is expected to continue to do so. Last year'sincome statements follow.en's boots. For each type of boot sold, it operates a separate department thatSalesCost of goods soldGross marginDepartment manager's salarySales commissionsRent on store leaseStore utilitiesNet income (loss)esRequiredMen'sDepartment$ 690,000(275,000)Women'sDepartmentChildren'sDepartment$ 490,000$ 230,000(184,000)(106,375)415,000306,000123,625(71,000)(60,000)(40,000)(125,200)(94,600)(37,400)(40,000)(40,000)(40,000)(23,000)(23,000)(23,000)$ 155,800$ 88,400$ (16,775)a. Calculate the children's department's contribution to profit. Determine whether to eliminate the children's department.b. Confirm the conclusion you reached in Requirement a by preparing income statements for the company as a whole with and withoutthe children's department.c. Eliminating the children's department would increase space available to display men's and women's boots. Suppose managementestimates that a wider selection of adult boots would increase the store's net earnings by $51,000. Would this information affect thedecision that you made in Requirement a?Complete this question by entering your answers in the tabs below.Reg AReq BReq CCalculate the children's department's contribution to profit. Determine whether to eliminate the children's department.Contribution to profit (loss)Should the children's department be eliminated?

It is the process of making decisions that involve the management of costs in order to achieve…

has its own manager. The manager of the men's department has a sales staff of nine employees, the manager of the women's department has six employees, and the manager of the children's department has three employees. All departments are housed i single store. In recent years, the children's department has operated at a net loss and is expected to continue to do so. Last year's income statements follow. 's boots. For each type of boot sold, it operates a separate department

has its own manager. The manager of the men's department has a sales staff of nine employees, the manager of the women's department has six employees, and the manager of the children's department has three employees. All departments are housed i single store. In recent years, the children's department has operated at a net loss and is expected to continue to do so. Last year's income statements follow. 's boots. For each type of boot sold, it operates a separate department

College Accounting (Book Only): A Career Approach

13th Edition

ISBN:9781337280570

Author:Scott, Cathy J.

Publisher:Scott, Cathy J.

ChapterE: Departmental Accounting

Section: Chapter Questions

Problem 3P

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Swain Athletic Gear (SAG) operates six retail outlets in a large Midwest city. One is in the center of the city on Cornwall Street and the others are scattered around the perimeter of the city. Management at SAG is concerned about declining sales and profitability of the Cornwall store and believes that outlet has been a drag on profits in recent years. The most recent income statement for the Cornwall store follows. SWAIN ATHLETIC GEAR Cornwall Street Store Income Statement For the Year Ending February 28 Sales revenue $ 12,300,000 Costs Cost of goods sold $ 5,289,000 Advertising 1,421,000 Store administrative salaries 975,000 Sales commissions 1,056,000 Leases and utilities 2,100,000 Allocated corporate support 1,622,000 Total costs $ 12,463,000 Net loss before tax benefit $ (163,000) Tax benefit at 25% (40,750) Net loss $ (122,250) The CFO at SAG has asked for your advice on closing the Cornwall Street store. If the Cornwall Street store is…
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Betty’s Fashions operates retail stores in both downtown and suburban locations. The company has two responsibility centers: the City Division, which contains stores in downtown locations, and the Mall Division, which contains stores in suburban locations. Betty’s CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last several years. The most recent City Division income statement follows. The CEO has asked for your advice on shutting down the City Division’s operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs of the Mall Division.
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