Dexter Products, Inc., manufactures and sells a number of items, including an overnight case. The company has been experiencing losses on the overnight case for some time, as shown on the following contribution format income statement:

Discontinuing the overnight cases would not affect sales of other product lines and would have no noticeable effect on the company's total general factory overhead or total purchasing department expenses.
Required:
Would you recommend that the company discontinue the manufacture and sale of overnight cases? Support your answer with appropriatecomputations.

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Dexter Products, Inc. For the Quarter Ended June 30 Sales Variable expenses: $450,000 $130,000 48,000 12.000 Sales commissions Shipping Total variable expenses Contribution margin Fixed expenses: 190,000 260,000 21,000 104,000 36,000 110,000 9,000 50,000 General factory overhead... Depreciation of equipment (no resale value) Insurance on inventories.. Total fixed expenses Net operating loss. 330,000 S (70,000) Allocated on the basis of machine-hours Allocated on the basis of sales dollars