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