Jordan Sports Company sells logo sports merchandise and does custom screen printing. They are trying to decide whether or not to continue screen printing. The following information is available for the segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if the screen printing were dropped. Screen Printing Apparel Sales Sales $120,000 $420,000 Variable Costs 72,000 220,000 Contribution Margin 48,000 200,000 Direct Fixed Costs 32,000 70,000 Allocated Common Fixed costs 20,000 70,000 Net Income ($4,000) $60,000 Reference: Ref 7-3 If screen printing is dropped, apparel sales will be unaffected. All direct fixed costs associated with screen printing will be eliminated. What will the effect on overall profits be if the segment is eliminated? Answer Overall profits will increase $4,000 Overall profits will decrease by $48,000 Overall profits will decrease by $16,000 Overall profits will decrease by $120,000