Foot Print Has Three Product Lines in Its Retail Stores

question 11

Multiple Choice

Foot Print has three product lines in its retail stores: shoes, boots, and sandals.The allocated fixed costs are based on units sold and are unavoidable.Results of June follow: $\begin{array}{lrrrr}& \text { Socks } & \text { Boots } & \text { Sandals } & \text { Total } \\ \text { Units sold } & 800 & 1,200 & 2,400 & 4,400 \\\hline \text { Revenue } & \$ 24,800 & \$ 30,400 & \$ 36,600 & \$ 91,800 \\\text { Variable costs } & 13,600 & 13,200 & 16,800 & 43,600 \\\text { Direct fixed costs } & 5,000 & 7,000 & 6,500 & 18,500 \\\text { Allocated fixed costs } & 8,000 & 9,000 & 8,000 & 25,000 \\\text { Net income (loss) } & \$(1,800) & \$ 1,200 & \$ 5,300 & \$ 4,700 \\\end{array}$ Demand of individual products is not affected by changes in other product lines.How much is the incremental effect on income of dropping socks?

• A)Decrease of $11,200
• B)Decrease of $6,200
• C)Increase of $1,800
• D)Decrease of $1,500

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Definitions:

Expenses

The economic costs that a business incurs through its operations to earn revenue, which could include costs of goods sold, salaries, and rent.

Sales Territory

The group of customers or a geographical area assigned to a salesperson.

Market Development Area

A specific geographic or demographic region identified for potential growth or expansion of a company's products or services.

Sales Quota

A specific sales target set for a salesperson or team to achieve within a defined time frame.