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Holly Sportsballs has three product lines in its retail stores: soccer balls, baseballs, and tennis balls....

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Accounting

Holly Sportsballs has three product lines in its retail stores:soccer balls, baseballs, and tennis balls. Results of the fourthquarter are presented below:

                                                          Soccer Balls     Baseballs       TennisBalls         Total

Unitssold                                        1,000              2,000              2,000              5,000

Revenue                                     $22,000          $40,000          $23,000          $85,000

Variable departmentalcosts         15,000            22,000            12,000            49,000

Direct fixedcosts                            1,000              3,000              2,000              6,000

Allocated fixedcosts                      8,000             8,000             8,000          28,000

Net income(loss)                        $ (2,000)          $7,000           $1,000           $6,000

The allocated fixed costs cannot be avoided. There will be nochanges in the demand of individual products caused by changes inother product lines.

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What will happen to profits if Holly Sportsballs discontinuesthe Soccer Balls product line?

Answer & Explanation Solved by verified expert
4.2 Ratings (786 Votes)
If soccer balls product line is discontinued the net income will decrease by 6000 Given below is analysis that shows how income will decrease Income statement Soccer    See Answer
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