Michael has a program coaching football, basketball, and baseball. However, the baseball program is not doing very well and he is considering discontinuing his baseball coaching. If he does discontinue baseball coaching, he will be able to eliminate 60% of the fixed costs of baseball coaching, but the other 40% will continue.
Football Basketball Baseball Total.
Revenues $25,000 $30,000 $15,000 $70,000
Variable Costs $10,000 $15,000 $ 8,000 $33,000
Contribution Margin $15,000 $15,000 $ 7,000 $37,000
Fixed Costs $ 7,000 $ 4,000 $10,000 $21,000
Operating Income $ 8,000 $11,000 $ -3,000 $16,000
What will be the change to income if Michael discontinues baseball coaching?
show your calculations Should he discontinue baseball?