Sports, Inc., is a nationwide distributor of sporting equipment. The corporate president, Wesley Coldwell, is dissatisfied with corporate operating results, particularly those of the Spring Branch, and has asked the controller for more information. The controller prepared the following segmented income statement (in thousands of dollars) for the Spring Branch:

Coldwell is considering adding a new product line, Kite Surfing. The controller estimates that adding this line to the spring Branch will increase sales by $300,000, variable costs by $150,000, and direct fixed costs by $20,000. The new product line will have no effect on common fixed costs.
Required
1. How will operating income be affected if the Baseball line is dropped?
2. How will operating income be affected if the Baseball line is kept and a Kite Surfing line is added?
3. If the Baseball line is dropped and the Kite Surfing line is added, sales of the Football line will decrease by 10 percent and sales of the Basketball line will decrease by 5 percent. How will those changes affect operating income?
4. What decision do you recommend?Explain.

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Sports, Inc., Spring Branch Segmented Income Statement For the Year Ended December 31 (Amounts In Thousands) Footbal Basebal Basketball Spring Line Branch Line Line Sales Less variable costs Contribution margin Less direct fixed costs Segment margin Less common fixed costs Operating income tloss) $3,500 $2,500 $2,059 $8,059 1800 7,095 $ 105 259 964 609 S 300 (S 45 100 355 450 $ 95) 2,900 S 600 300 2,395 150 ) 159 -- -