$3$Peat Sports Manufacturer produces equipment for three sports: baseball, basketball, and golf. The accountants prepared a segmented contribution margin statement for the past year based on the three types of products manufactured as shown below. The CEO is concerned with the basketball equipment segment as it has been showing a loss for the past few years.

$3$Peat Sports Manufacturer

Segmented Contribution Margin Statement

For the Year Ended December $31,2019$

Baseball Basketball Golf Total

Revenue $$650,000$ $$433,000$ $$741,000$ $$1,824,000$

Variable Costs $$252,000$ $$277,000$ $$239,000$ $$768,000$

Contribution Margin $$398,000$ $$156,000$ $$502,000$ $$1,056,000$

Fixed Costs $$323,000$ $$225,000$ $$406,000$ $$954,000$

Income from Operations $$75,000$ $$-69,000$ $$96,000$ $$102,000$

Recommend whether $3$Peat should keep or drop the basketball equipment product line based on the following independent scenarios:

Do not enter dollar signs or commas in the input boxes.

Use the negative sign for a decrease in income.

Indicate keep or drop using the drop$-$down lists.

a$)$ If the line is dropped, assume that all the fixed costs relating to the basketball equipment segment would remain with the company.

Change in Income from Operations: $Answer

$-69000$

$3$Peat should Answer

keep

the basketball line

b$)$ Assume that all the fixed costs relating to the basketball segment would no longer be incurred by the company if the product line is dropped.

Change in Income from Operations: $Answer

$69000$

$3$Peat should Answer

drop

the basketball line

c$)$ Only $30\%$ of the fixed costs relating to the basketball segment would remain with the company if the product line is dropped.

Change in Income from Operations: $Answer

$3$Peat should Answer

drop

the basketball line