Question
Wedding Supply is trying to decide whether or not to continue distributing reception supplies. The following information is available for Wedding Supply's business segments. Reception
Wedding Supply is trying to decide whether or not to continue distributing reception supplies. The following information is available for Wedding Supply's business segments.
Reception SuppliesBridal DressesFloral Decorations
Sales $160,000 $110,000 $210,000
Variable costs84,00050,000120,000
Contribution margin 76,000 60,000 90,000
Direct fixed costs 50,000 20,000 25,000
Allocated common fixed costs30,00025,00030,000
Net Income ($ 4,000) $ 15,000 $ 35,000
If reception supplies are dropped, floral decorations sales are expected to increase by 20%. What impact will the increase in floral decorations have on overall profitability?
A. Income will increase by $7,000.
B. Income will increase by $16,000.
C.Income will decrease by $18,000.
D.Income will decrease by $8,000.
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