Vulcan Swimsuit Company is considering dropping its line of women's beach robes. A recent product income statement for the robe line follows:
Revenue ....................................................... $950,760
Cost of goods sold .......................................... 861,840
Gross margin ................................................ 88,920
Selling and administrative expenses ..................... 136,800
Net loss .......................................................$ (47,880)
Factory overhead accounts for 35 percent of the cost of the goods sold and is one-third fixed. These data are believed to reflect conditions in the immediate future.
Required:
Should the line be dropped?