Mila Fashion in Now York opcrates three dcpartments: Mon\'s, Wmcn\'s, and Acois
ID: 2600262 • Letter: M
Question
Mila Fashion in Now York opcrates three dcpartments: Mon's, Wmcn's, and Acois Mila Fashion allocatos all fixed expenses unavodable buiktng dcpreciation and utlitics) baed on cach dcpartments square fooage Dcpartmental ocrating inccme data tor the third quarter af the current year are as tallovs Click the icon to view' the data ) The slore will rerain in the sae buildig regardless of whelher any of the departments are dropped Shouk Mila Fashicn dop ariy of the dep tels? Give your reasc The Men's and Women's Departments are | . While the Accessories Department appears to be I , even this department has The Accessories Department is contributing $1 toward covering | whether or not Mia Fashion eliminates department. These fixed costs are therefore in the Mila Fashion intends to remain in the same building whether or not it drops any of the decartments Consequently, the fxed costs will decision whelher to eliinale a deparient In sum, Mila Hashion 1 Data Table Mila Fashion Product Line Contribution Margin Income Statement For the Year Product lines Men's Women's Accessories Company Total Sales revenue Less: Variable expenses Contritbuton rmagiri Less. Fixed expenses Operaling income S 109,000 S 56,000 3 98,000 S 283,000 19 D 50,000 24,000 0,000 3 25,000 04,000 7,000 DI 26,0003 18,000 Enter your answer In the answer box.Explanation / Answer
The Men's & Women's deartments are profit-making while the Accessories Department appears to be Loss-making. Even this department has a positive contribution.The accessories department is contributing $ 8000 toward covering $ 67000 . Mila Fashion intends to remain in the same building whether or not it drops any of the depts.Consequently the fixed costs will continue whether or not Mila Fashion eliminates a dept.These fixed costs are therefore, irrelevant in the decision to eliminate a department. In sum,Mila Fashion must continue to operate all the 3 departments, as long as each contributing to the fixed costs.