Molina medical supply company is trying to decide whether

Reference no: EM13605765

Molina Medical Supply Company is trying to decide whether or not to continue distributing hospital supplies. The following information is available for Molina's business 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 a segment is dropped. Hospital Supplies Retail Stores Mail Order Sales $120,000 $440,000 $360,000 Variable costs 64,000 200,000 140,000 Contribution Margin 56,000 240,000 220,000 Direct Fixed Costs 50,000 80,000 90,000 Allocated common fixed costs 20,000 70,000 60,000 Net Income ($ 14,000) $ 90,000 $ 70,000 Assume that if hospital supplies were dropped, retail store sales would increase by 25%. What would the impact of the increase in retail store sales have on overall profitability?

Reference no: EM13605765

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