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Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct fixed costs can be avoided if a segment is dropped. The information is available for the segments. Custom Logo Embroidery Apparel Sales $60,000 $250,000 Variable costs 29,000 111,000 Contribution margin $31,000 $139,000 Direct fixed costs 22,000 41,000 Allocated common fixed costs 12,000 50,000 Net income $(3,000) $48,000 A. What will be the impact on net income if the embroidery segment is dropped? Net income $ B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? Contribution margin 2$ Net income C. Identify one cost that is not relevant in this analysis.

Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct fixed costs can be avoided if a segment is dropped. The information is available for the segments. Custom Logo Embroidery Apparel Sales $60,000 $250,000 Variable costs 29,000 111,000 Contribution margin $31,000 $139,000 Direct fixed costs 22,000 41,000 Allocated common fixed costs 12,000 50,000 Net income $(3,000) $48,000 A. What will be the impact on net income if the embroidery segment is dropped? Net income $ B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? Contribution margin 2$ Net income C. Identify one cost that is not relevant in this analysis.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct fixed costs can be avoided if a segment is dropped. The information is available for the segments. Custom Logo Embroidery Apparel Sales $60,000 $250,000 Variable costs 29,000 111,000 Contribution margin $31,000 $139,000 Direct fixed costs 22,000 41,000 Allocated common fixed costs 12,000 50,000 Net income $(3,000) $48,000 A. What will be the impact on net income if the embroidery segment is dropped? Net income $ B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? Contribution margin $ Net income $4 C. Identify one cost that is not relevant in this analysis.
Transcribed Image Text:Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct fixed costs can be avoided if a segment is dropped. The information is available for the segments. Custom Logo Embroidery Apparel Sales $60,000 $250,000 Variable costs 29,000 111,000 Contribution margin $31,000 $139,000 Direct fixed costs 22,000 41,000 Allocated common fixed costs 12,000 50,000 Net income $(3,000) $48,000 A. What will be the impact on net income if the embroidery segment is dropped? Net income $ B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? Contribution margin $ Net income $4 C. Identify one cost that is not relevant in this analysis.
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