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Wedding Supply is trying to decide whether or not to continue distributing reception supplies. The...

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Accounting

Wedding Supply is trying to decide whether or not to continue distributing reception supplies. The following information is available for Wedding Supplys 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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