Discontinuing a Segment

Anthropologie, owned by URBN, sells both standard and custom size furniture items. Assume that the contribution income statements for both segments follow.

Standard Custom Total

Sales $$2,000,000$ $$100,000$ $$2,100,000$

Less variable costs $1,200,00080,0001,280,000$

Contribution margin $800,00020,000820,000$

Less fixed costs $600,00035,000635,000$

Net income $($loss$)$ $$200,000$ $$(15,000)$ $$185,000$

Management is considering discontinuing the Custom segment due to the segment$$s net loss of $$15,000.$ Of the total fixed costs for the Custom segment, $$10,000$ would not be incurred $($a cost saving$)$ if the Custom segment is dropped. Management expects no changes to the sales of the Standard segment if the Custom segment is discontinued.

REQUIRED

If the Custom segment is discontinued, what will be the net effect on the profit of the company?

Note: enter all numbers as positive numbers, do NOT use a negative sign.

Profits would Answer by $Answer