On the basis of the following data, the general manager of Hawkeye Shoes Inc. decided to discontinue Children’s Shoes because it reduced operating income by $30,000. Hawkeye Shoes Inc. Product-Line Income Statement For the Year Ended November 30, 20Y8 Children's Shoes Men's Shoes Women's Shoes Total Sales $280,000 $300,000 $500,000 $1,080,000 Costs of goods sold: Variable costs $(135,000) $(150,000) $(220,000) $(505,000) Fixed costs (45,000) (60,000) (120,000) (225,000) Total cost of goods sold $(180,000) $(210,000) $(340,000) $(730,000) Gross profit $100,000 $90,000 $160,000 $350,000 Selling and administrative expenses: Variable selling and admin. expenses $(100,000) $(45,000) $(95,000) $(240,000) Fixed selling and admin. expenses (30,000) (20,000) (25,000) (75,000) Total selling and admin. expenses $(130,000) $(65,000) $(120,000) $(315,000) Operating income (loss) $(30,000) $25,000 $40,000 $35,000 a. Prepare a differential analysis to determine the

Hawkeye Shoes Inc.

Differential Analysis:

Alternative 1: Continue with Children Shoes:

Hawkeye Shoes Inc. Product-Line Income Statement For the Year Ended November 30, 20Y8

                                       Children's       Men's        Women's      Total     Sales                              $280,000    $300,000   $500,000  $1,080,000

Costs of goods sold:

Variable costs               $(135,000)  $(150,000)  $(220,000) $(505,000)

Fixed costs                       (45,000)      (60,000)     (120,000)    (225,000)

Total cost of goods

 sold                             $(180,000)  $(210,000)  $(340,000)  $(730,000)

Gross profit                   $100,000     $90,000     $160,000    $350,000

Selling and administrative expenses:

Variable selling and

 admin. expenses      $(100,000)   $(45,000)     $(95,000) $(240,000) Fixed selling and

 admin. expenses         (30,000)      (20,000)      (25,000)       (75,000)

Total selling and

 admin. expenses     $(130,000)    $(65,000)  $(120,000)   $(315,000)

Operating income

  (loss)                         $(30,000)     $25,000     $40,000      $35,000

Alternative 2: Discontinue Children Shoes:

Hawkeye Shoes Inc. Product-Line Income Statement For the Year Ended November 30, 20Y8

                                                      Men's        Women's         Total    

Sales                                         $300,000      $500,000     $800,000

Costs of goods sold:

Variable costs                         $(150,000)    $(220,000)    $(370,000)

Fixed costs                                 (60,000)       (120,000)       (180,000)

Total cost of goods sold        $(210,000)    $(340,000)     $(550,000)

Gross profit                               $90,000      $160,000       $250,000

Selling and administrative expenses:

Variable selling and admin.    $(45,000)     $(95,000)      $(140,000)

Fixed selling and admin.          (20,000)        (25,000)          (45,000)

Total selling and admin.        $(65,000)     $(120,000)      $(185,000)

Operating income (loss)         $25,000        $40,000         $65,000

Choose Alternative 2, the elimination of Children Shoes, as this increases the total profits from $35,000 to $65,000.

Explanation:

a) Data and Calculations:

Hawkeye Shoes Inc. Product-Line Income Statement For the Year Ended November 30, 20Y8

                                       Children's       Men's        Women's      Total     Sales                              $280,000    $300,000   $500,000  $1,080,000

Costs of goods sold:

Variable costs               $(135,000)  $(150,000)  $(220,000) $(505,000)

Fixed costs                       (45,000)      (60,000)     (120,000)    (225,000)

Total cost of goods

 sold                             $(180,000)  $(210,000)  $(340,000)  $(730,000)

Gross profit                   $100,000     $90,000     $160,000    $350,000

Selling and administrative expenses:

Variable selling and

 admin. expenses      $(100,000)   $(45,000)     $(95,000) $(240,000) Fixed selling and

 admin. expenses         (30,000)      (20,000)      (25,000)       (75,000)

Total selling and

 admin. expenses     $(130,000)    $(65,000)  $(120,000)   $(315,000)

Operating income

  (loss)                         $(30,000)     $25,000     $40,000      $35,000

Hawkeye Shoes Inc. differential analysis helps it to choose between alternatives 1 and 2 concerning the continuation or discontinuation of Children Shoes production.  It is an important tool in managerial accounting to helps management to make research-driven decisions.

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.

answer; the cpi;