Greenview Corp. is considering eliminating a product from its line of outdoor tables. Two products, the Sunrise and Noche tables, have impressive sales. However, sales for the Blanco model have been dismal. Information related to Greenview’s outdoor table line is shown on the following page.

Greenview has determined that eliminating the Blanco model will cause sales of the Sunrise and
Noche tables to increase by 10 percent and 5 percent, respectively. Variable costs for these two models will increase proportionately. Direct fixed costs are avoidable, but common fixed costs will remain unchanged.

Required:
1. Will Greenviews’s net operating income increase or decrease if the Blanco model is eliminated? By how much?
2. Should Greenview drop the Blanco model?
3. Suppose Greenview had $3,800 of direct fixed overhead that was traceable to the Blanco model. Would your recommendation to Greenview change? Why or whynot?

Segmented Income Statement for Greenview's Outdoor Table Products Sunrise $110,000 77,000 $33,000 3,200 $ 29,800 16,800 Noche $77,000 52,000 $25,000 2,400 $22,600 11,760 $10,840 Blanco $33,000 25,500 7,500 3,000 4,500 5,040 $ (540) Total $220,000 154,500 $65,500 8,600 $56,900 33,600 23,300 Sales revenue Variable costs Contribution margin Less: Direct fixed costs Segment margin Common fixed costs Net operating income (loss 13,000 Allocated based on total sales dollars