Palmer Co$.$ manufactures a variety of athletic shoes: basketball, running, and tennis. Sales of the

tennis shoes have fallen off. Palmer is considering several options: $(1)$ drop the tennis shoe line;

$(2)$ replace the tennis shoe line with golf shoes; or $(3)$ retool the tennis shoe line to make

$$Airtennies$.$ Price and cost data are as follows:

Basketball Running Tennis Golf Airtennies

Price $$90$ $$65$ $$40$ $$60$ $$70$

Variable cost$/$unit $$45$ $$40$ $$35$ $$43$ $$50$

Fixed costs $$200,000$ $$210,000$ $$50,000$ $$50,000$ $$90,000$

Number of units $10,00015,0002,50025,0006,000$

If the tennis shoe line is dropped, the $$50,000$ fixed cost is totally avoidable.

Required:

$1.$ Calculate the impact on operating income, using relevant amounts only, for keeping the

tennis shoe line.

$2.$ Calculate the impact on operating income, using relevant amounts only, for option $1.$

$3.$ Calculate the impact on operating income, using relevant amounts only, for option $2.$

$4.$ Calculate the impact on operating income, using relevant amounts only, for option $3.$

$5.$ Which option is best?