HASF & company sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltiomore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and earnings Much of this decline is attributable to the internet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow
| Paint and supplies | Carpeting | wallpaper | Total | |
| sales | 250,000 | 230,000 | 70,000 | 550,000 |
| less variable cost | 170,000 | 161,000 | 56,000 | 387,000 |
| fixed costs | 40,000 | 40,000 | 40,000 | 120,000 |
| total cost | 210,000 | 201,000 | 96,000 | 507,000 |
| operating income | 40,000 | 29,000 | -26,000 | 43,000 |
Other information:
Management is studying whether to drop wallpaper because of the changing market and accompanying loss if the line is dropped the following changes are expected to occur
1. The vacated space will be remodeled at a cost of 6,200 and will be devoted to an expanded line of high and carpet sales of carpet are expected to increase by 60,000 and the line overall contribution margin ratio will rise by 5%
2. Contemporaty can cut wallpapers fixed costs by 40%
3. Sales of paint and paint supplies are expected to fall by 20%
4. The firm will increase advertising expenditures by 12,500 to promote the expanded carpet line
Required:
At what amount of proift will be decreased after the dropped =?
