Reference no: EM132935086

Flare Fashions is a clothing store that has three departments: men's, women's and children's clothing. Sales and variable costs for each department are shown below. In addition, each department has its own fixed costs for staffing and takes a one-third (1/3) share of rental and management costs for the clothing store as a whole (as shown in the table below).

                                                                    Men's                          Women's                     Children's

Sales                                               $175,000                   $280,000                  $115,000

Variable costs as a percentage of department

sales                                                   45%                           53%                        49%

Departmental fixed costs                     $50,000                        $55,000                    $35,000

Department's portion of shared fixed costs $35,000                       $35,000                  $35,000

Problem a. Calculate the profitability of Flare Fashions' three departments.

Problem b. Management is considering shutting down one or more of Flare Fashions' departments, and would like your advice. What recommendations can you provide management?