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 Extreme Sports sells logo sports merchandise


 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 $59,000 $251,000 Variable costs 30,000 110,000 Contribution margin $29,000 $141,000 Direct fixed costs 23,000 40,000 Allocated common fixed costs 13,000 51,000 Net income $(7,000) $50,000 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 C. Identify one cost that is not relevant in this analysis.

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