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Making dropping a product and product-mix decisions Deela Fashions operates three departments: Men's, Women's, and Accessories. Departmental operating income data for the third quarter of 2012 are as follows:
DEELA FASHIONS
Income Statement
For the quarter ended September 30, 2012
Department
Men's
Women's
Accessories
Total
Sales revenue
$108,000
$55,000
$ 100,000
$
263,000
Variable expenses
58,000
30,000
92,000
180,000
Fixed expenses
26,000
21,000
73,000
Total expenses
84,000
51,000
118,000
253,000
Operating income (loss)
$24,000
$4,000
$ (18,000)
$ 10,000
Assume that the fixed expenses assigned to each department include only direct fixed costs of the department:
If Deela Fashions drops a department, it will not incur these fixed expenses.
Requirement
1. Under these circumstances, should Deela Fashions drop any of the departments? Give your reasoning.
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