Vernon Boot Company sells men's, women's, and children's boots. For each type of boot sold, it operates a separate department that
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 in a
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.
Required
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 by preparing income statements for the company as a whole with and without
the children's department.
c Eliminating the children's department would increase space available to display men's and women's boots. Suppose management
estimates that a wider selection of adult boots would increase the store's net earnings by $ Would this information affect the
decision that you made in Requirement
