Maxley Markets Company sells logo sports merchandise and does custom embroidery. They are trying to decide whether or not to continue embroidery.

Maxley Markets Company sells logo sports merchandise and does custom embroidery. They are trying to decide whether or not to continue embroidery. The following information is available for the segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if the embroidery were dropped. Embroidery Apparel SalesSales $120,000 $420,000Variable Costs $90,000 $220,000Contribution Margin $30,000 $200,000Direct Fixed Costs $18,000 $70,000Allocated Common Fixed Costs $20,000$70,000Net Income ($ 8,000) $ 60,000(a) What would be the impact on profits if embroidery was dropped?(b) Assume that if embroidery was dropped, apparel sales would increase 20%. What is the impact on contribution margin and net income?(c) Give an example of a cost that is not relevant in this analysis.

Maxley Markets Company sells logo sports merchandise and does custom embroidery. Theyare trying to decide whether or not to continue embroidery. The following information is availablefor the…

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