Wedding Supply Is Trying to Decide Whether or Not to Continue

question 99

Multiple Choice

Wedding Supply is trying to decide whether or not to continue distributing reception supplies.The following information is available for Wedding Supply's business segments. $\begin{array}{lrrr}&\text { Reception Supplies }&\text { Bridal Dresses }&\text { Floral Decorations }\\\hline\text { Sales } & \$ 160,000 & \$ 110,000 & \$ 210,000 \\\text { Variable costs } & 84,000 & 50,000 & 120,000\\\text { Contribution margin } & 76,000 & 60,000 & 90,000 \\\text { Direct fixed costs } & 50,000 & 20,000 & 25,000 \\\text { Allocated common fixed costs } & 30,000 & 25,000 & 30,000 \\\text { Net income }&(\$4,000) &\$15,000&\$35,000\end{array}$ If reception supplies are dropped, floral decoration sales are expected to increase by 20%.What impact will the increase in floral decorations have on overall profitability?

• A)Income will increase by $7,000.
• B)Income will increase by $16,000.
• C)Income will decrease by $18,000.
• D)Income will decrease by $8,000.

---

Definitions:

Pintle Hook

A type of heavy-duty towing hitch that uses a hook and loop system for connecting trailers, commonly used in military and industrial applications.

Refrigerated Trailers

Transport trailers equipped with a refrigeration unit to maintain specific temperatures for perishable goods during transit.

Electronically Managed

Refers to systems or processes controlled or regulated by electronic devices and software rather than manual or mechanical means.

Gasoline Fueled

Powered by gasoline, a petroleum-derived liquid that is used primarily as fuel in internal combustion engines.