Smart Clothing has three product lines: pants, shirts, and socks. The allocated fixed costs are the only fixed costs that are all unavoidable (will remain). Results of the fourth quarter are presented below:

Pants Shirts Socks Total

Units sold 1,000 1,200 1,500 3,700

Revenue $27,000 $15,000 $10,000 $52,000

Variable departmental costs 15,000 8,000 5,000 28,000

Direct fixed costs 5,000 3,000 4,500 12,500

Allocated fixed costs 5,000 3,000 2,500 10,500

Net income (loss) $ 2,000 $1,000 ($2,000) $1,000

Instructions

Demand of individual products is not affected by changes in other product lines. Prepare an incremental analysis of the effect of dropping the sock product line.