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Question Content Area 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 Embroidery    Logo Apparel Sales $60,000        $250,000    Variable costs 29,000        110,000    Contribution margin $31,000        $140,000    Direct fixed costs 22,000        39,000    Allocated common fixed costs 13,000        49,000    Net income $(4,000)      $52,000    A. What will be the impact on net income if the embroidery segment is dropped? Net income $fill in the blank 1    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 $fill in the blank 3   Net income $fill in the blank 5   C. Identify one cost that is not relevant in this analysis.

Question Content Area 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 Embroidery    Logo Apparel Sales $60,000        $250,000    Variable costs 29,000        110,000    Contribution margin $31,000        $140,000    Direct fixed costs 22,000        39,000    Allocated common fixed costs 13,000        49,000    Net income $(4,000)      $52,000    A. What will be the impact on net income if the embroidery segment is dropped? Net income $fill in the blank 1    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 $fill in the blank 3   Net income $fill in the blank 5   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
    Embroidery    		    Logo
    Apparel
    Sales $60,000        $250,000   
    Variable costs 29,000        110,000   
    Contribution margin $31,000        $140,000   
    Direct fixed costs 22,000        39,000   
    Allocated common fixed costs 13,000        49,000   
    Net income $(4,000)      $52,000   

    A. What will be the impact on net income if the embroidery segment is dropped?

    Net income $fill in the blank 1 

     

    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 $fill in the blank 3
     
    Net income $fill in the blank 5
     

    C. Identify one cost that is not relevant in this analysis.

     
     
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