Macho Sports Company Sells Soccer and Baseball Merchandise The Company Will Allocate More Space to the Soccer Product

Multiple Choice

Macho Sports Company sells soccer and baseball merchandise.The company is trying to decide whether or not to continue the baseball merchandise given the decline in the demand and current loss of this product line.The following information is available for the segments: $\begin{array} { l r r } & \text { Baseball } & \text { Soccer } \\\text { Sales } & \$ 120,000 & \$ 420,000 \\\text { Variable costs } & 72,000 & 220,000 \\\text { Contribution margin } & 48,000 & 200,000 \\\text { Direct fixed costs } & 32,000 & 70,000 \\\text { Allocated common fixed costs } & 20,000 & 70,000 \\\text { Net income }&(\$4,000) &\$60,000\end{array}$ The company will allocate more space to the soccer product line if the baseball line is dropped.This will allow soccer sales to increase by 25%.What is the incremental effect of the decision to drop the baseball line?

A) Net income will increase by $2,000.
B) Net income will increase by $30,000.
C) Net income will increase by $34,000.
D) Net income will increase by $54,000.