Diva Footwear Is Contemplating If It Should Continue Producing Platform

question 37

Multiple Choice

Diva Footwear is contemplating if it should continue producing platform shoes. The following information is available for the company's segments. $\begin{array}{lrrr}&\text { Platform Shoes}&\text { Athletic Shoes}&\text { Boots }\\\hline\text { Sales } & \$ 120,000 & \$ 420,000 & \$ 360,000 \\\text { Variable costs } & 64,000 & 220,000 & 140,000\\\text { Contribution margin } & 56,000 & 200,000 & 220,000 \\\text { Direct fixed costs } & 45,000 & 70,000 & 90,000 \\\text { Allocated fixed costs } & 20,000 & 70,000 & 60,000\\\text { Net income }&(\$9,000) &\$60,000&\$70,000\end{array}$ If platform shoes are dropped, sales of athletic shoes are expected to drop by 10%. What impact will occur to Diva Footwear's net income?

• A) Income will decrease by $11,000.
• B) Income will decrease by $31,000.
• C) Income will decrease by $53,000.
• D) Income will increase by $9,000.

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Definitions:

Power

The ability to get someone else to do something you want done, or the ability to make things happen or get things done the way you want.

Achievement-oriented Leadership

A leadership style focused on setting challenging goals, emphasizing excellence, and working towards the achievement of those goals.

Directive Leadership

A leadership style characterized by clear instructions, close supervision, and a top-down approach to decision-making.

Supportive Leadership

A leadership style focused on providing emotional support, encouragement, and fostering a positive work environment for subordinates.