Party Supply is trying to decide whether or not to continue its costume segment. The information shown is available for Party Supply’s business segments. Assume that neither the Direct fixed costs nor the Allocated common fixed costs may be eliminated, but will be allocated to the two remaining segments.

If costumes are dropped, what change will occur to profit?

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Sales Variable costs Contribution margin Direct fixed costs Allocated common fixed costs Net income Costumes $160,000 84,000 76,000 50,000 30,000 $ (4,000) Party Supplies $110,000 50,000 60,000 20,000 25,000 $ 15,000 Floral Decorations $210,000 120,000 90,000 25,000 30,000 $ 35,000