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 Supplies    Bridal Dresses    Floral Decorations Sales                                          $160,000                $110,000           $210,000 Variable costs                                84,000                    50,000             120,000 Contribution margin                       76,000                    60,000               90,000 Direct fixed costs                           50,000                    20,000               25,000 Allocated common fixed costs      30,000                    25,000               30,000 Net Income                                 ($  4,000)               $  15,000           $  35,000   If reception supplies are dropped, floral decoration sales are expected to increase by 5%. What impact will the increase in floral decorations have on overall profitability?     Income will increase by $19,000.     Income will increase by $16,000.     Income will decrease by $17,000.     Income will decrease by $8,000.     Income will decrease by $21,500.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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 Supplies    Bridal Dresses    Floral Decorations

Sales                                          $160,000                $110,000           $210,000

Variable costs                                84,000                    50,000             120,000

Contribution margin                       76,000                    60,000               90,000

Direct fixed costs                           50,000                    20,000               25,000

Allocated common fixed costs      30,000                    25,000               30,000

Net Income                                 ($  4,000)               $  15,000           $  35,000

 

If reception supplies are dropped, floral decoration sales are expected to increase by 5%. What impact will the increase in floral decorations have on overall profitability?

   

Income will increase by $19,000.

   

Income will increase by $16,000.

   

Income will decrease by $17,000.

   

Income will decrease by $8,000.

   

Income will decrease by $21,500.

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