Edna Fashions operates three​ departments: Men's,​ Women's, and Accessories. Departmental operating income data for the third quarter of 2024 are as​ follows:
Edna Fashions
Income Statement
For the Quarter Ended September 30, 2024
Department
Men's Women's Accessories Total
Net Sales Revenue $101,000 $59,000 $102,000 $262,000
Variable Costs 65,000 35,000 91,000 191,000
Contribution Margin 36,000 24,000 11,000 71,000
Fixed Costs 27,000 19,000 29,000 75,000
Operating Income (Loss) $9,000 $5,000 $(18,000) $(4,000)
Assume that the fixed costs assigned to each department include only direct fixed costs of the​ department:
•Salary of the​ department's manager
•Cost of advertising directly related to that department
​If Edna Fashions drops a​ department, it will not incur these fixed costs. Under these​ circumstances, should
Edna Fashions drop any of the​ departments? Give your reasoning.
Begin by completing the following analysis to determine the increase or decrease in operating income from dropping the Accessories​ Department, the only Department showing an operating loss this quarter. ​(Enter decreases to profits with a parentheses or minus​ sign.)
Edna Fashions
Analysis of Dropping the Accessories Department
Expected decrease in revenues
Expected decrease in costs:
Expected decrease in variable costs
Expected decrease in fixed costs
Expected decrease in total costs in operating income