Answer Happy

Part 4-A: Add/drop line (4 marks) The management team of the Calgary operations expressed concerns about a different segment of the business - the boots product line - not just for their own region, but for all of the operations in Alberta and Saskatchewan. Profits have been declining due to competition for designer boots. New innovations in processing and machinery along with price increases for the high-quality materials that the company depends on are potential problems that the managers feel they have limited control over. As a result, they have asked you to conduct analysis to determine if the boot line should be retained or eliminated. The managers of the Calgary team worked with managers from the other Alberta and Saskatchewan regions to compile and consolidate financial information for the boots line through-out these regions. Dynamadics Inc. Alberta and Saskatchewan Operations Income Statement - Boots Product Line For the year ended December 31, 2021 $ $ 3,265,500 1,497,200 Sales Less: Variable expenses: Less: Fixed expenses: Wages/Salaries Insurance on inventory Advertising expense Depreciation on equipment Total Fixed expenses Net operating income (loss) 1,216,200 63,960 705,960 120,000 2,106,120 (337,820) If these regions determine that the boots line should be dropped, only two employees will be retained to support continued operations in other product lines. These employees currently earn a combined annual salary of: 184,640 Requirement: Should the boot line be eliminated? Support your response with the required analysis.