Mr. Earl Pearl, accountant for Margie Knall Co., Inc., has prepared the following product-line income data:

The following additional information is available:
* The factory rent of $1,500 assigned to Product C is avoidable if the product were dropped.
* The company's total depreciation would not be affected by dropping C.
* Eliminating Product C will reduce the monthly utility bill from $1,500 to $800. * All supervisors' salaries are avoidable.
* If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $3,000 to $2,000.
* Elimination of Product C will make it possible to cut two persons from the administrative staff; their combined salaries total $3,000.

Required:
a. Prepare an analysis for Product C.
b. Whether Product C should be eliminated.

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Product Total $ 50,000 S 20,000 S 30,000 S 100,000 Sales Variable expenses 60,000 30,000 10,000 20,000 Contribution margin 40,000 20,000 10,000 10,000 Fixed expenses: 1,500 Rent 5,000 2,500 1,000 Depreciation 6,000 3,000 1,200 1,800 4,000 Utilities 2,000 500 1,500 B. Supervisors' salaries 1,500 500 3,000 5,000 3,000 Maintenance 1,500 600 900 Administrative expenses 10,000 3,000 2,000 5,000 Total fixed expenses 33,000 13,500 5,800 13,700 Net operating income 7,000 6,500 4,200 S (3,700 )