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 Assume the more space will be allocated to apparel sales if screen printing is dropped. This will allow apparel sales to increase by 25%. What is the impact on gross profits of a 25% increase in apparel sales?

Gross profit will increase by $105,000

Gross profit will increase by $50,000

Gross profit will increase by $325,000

Gross profit will increase by $15,000