Diva Footwear Is Contemplating If It Should Continue Producing Platform

question 57

Multiple Choice

Diva Footwear is contemplating if it should continue producing platform shoes. The following information is available for the company's segments. $\begin{array}{lrrr}&\text { Platform Shoes}&\text { Athletic Shoes}&\text { Boots }\\\hline\text { Sales } & \$ 120,000 & \$ 420,000 & \$ 360,000 \\\text { Variable costs } & 64,000 & 220,000 & 140,000\\\text { Contribution margin } & 56,000 & 200,000 & 220,000 \\\text { Direct fixed costs } & 45,000 & 70,000 & 90,000 \\\text { Allocated fixed costs } & 20,000 & 70,000 & 60,000\\\text { Net income }&(\$9,000) &\$60,000&\$70,000\end{array}$ If platform shoes are dropped, what effect will occur to Diva Footwear's net income?

• A) Increase by $9,000
• B) Decrease by $56,000
• C) Decrease by $11,000
• D) Increase by $56,000

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