Suppose that Flyaway Company also produces the Windy model fan, which currently has a net loss of \($40,000\) as follows:

Eliminating the Windy product line would eliminate \($20,000\) of direct fixed costs. The \($50,000\) of common fixed costs would be redistributed to Flyaway’s remaining product lines.

Determine whether Flyaway should eliminate the Windy fan line and explain why or why not.

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Sales revenue Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Profit Windy Model $160,000 130,000 $ 30,000 20,000 $ 10,000 50,000 $ (40,000)