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Problem 13-26A (Algo) Eliminating a segment LO 13-4 Baird Boot Co. 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. 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, Sales Cost of goods sold Gross margin Department manager's salary Sales commissions Rent on store lease Store utilities Net income (los) Men's Department $ 620,000 (266,500) 353,500 (54,600) (188,200) (23,600) 16,000) $ 162,300 Women's Department $ 440,000 (177,200) 262,800 (43,000) (77.600) (23,000) (6,000) $ 113,200 Children's Department 5160,000 197,875) 62.125 123,000) (28,900) (23,000) (6,608) $(18,775) Required a Calculate the contribution to profit. Determine whether to eliminate the children's department b-1. Calculate the net income for the company as a whole with the children's department b-2. Confirm the conclusion you reached in Requirement a by preparing income statements for the company 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 $34.000 Would this information affect the decision that you made in Requirement ? Sales Cost of goods sold Gross margin Department manager's salary Sales commissions Rent on store lease Store utilities Net income (loss) Men's Women's Department Department 620,000 440,000 226,500 177,200 393,500 262,800 353,500 262,800 162,300 2 Company Total 1,060,000 403.700 656,300 616,300 162,300 2 0 $ -122,302 $ 0 $ -122,302

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