For this activity you will remain with the group you worked with for the first group assignment. Your group will consider the following case and present its findings.
The ABC department store has three major product lines: hardware, clothing, and sporting goods. The store is considering dropping the clothing line because the income statement shows that it is operating at a loss. Note the income statement for these product lines below:
|
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Hardware
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Clothing
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Sporting Goods
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Total
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|
Sales
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$10,000
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$15,000
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$25,000
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$50,000
|
|
Less: Variable costs
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$6,000
|
$8,000
|
$12,000
|
$26,000
|
|
Contribution Margin
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$4,000
|
$7,000
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$13,000
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$24,000
|
|
Less: Fixed costs
|
|
|
|
|
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Direct
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$2,000
|
$6,500
|
$4,000
|
12,500
|
|
Allocated
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$1,000
|
$1,500
|
$2,500
|
$5,000
|
|
Total fixed costs
|
$3,000
|
$8,000
|
$6,500
|
$17,500
|
|
Net Income
|
$1,000
|
($1,000)
|
$6,500
|
$6,500
|
Should the store drop the clothing line of business? Explain using the sales and cost data above.
You have been provided with two areas in the course to discuss and collaborate: A group discussion forum and this wiki collaboration area. Only group members have access to these areas and will be able to see the discussion you have and the work you do within these areas. You are also free to use tools outside of the course, such as Google Docs, Yammer, etc. if your group chooses to do so.
Your final PowerPoint presentation should consist of 3-4 slides and is due in Unit 7. You will have the next 2 units to work together to create the PowerPoint.