Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct
A Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct fixed costs can be avoided if a segment is dropped. The information is available for the segments. Custom Embroidery Logo Apparel Sales $61,000 $250,000 Variable costs 31,000 111,000 Contribution margin $30,000 $ 139,000 Direct fixed costs 22,000 40,000 Allocated common fixed costs 13,000 51,000 Net income $(5,000) $48,000 A. What will be the impact on net income if the embroidery segment is dropped? Net income $ 8,000 Decrease B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? Contribution margin Increase Net income $ Increase C. Identify one cost that is not relevant in this analysis
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started