Answer Happy

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.
A. What will be the impact on net income
if the embroidery segment is dropped?
Net income $fill in the blank 1
DecreaseIncrease
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?
DecreaseIncrease
DecreaseIncrease
C. Identify one cost that is not relevant
in this analysis.
Common fixed costsDirect fixed costsVariable costs