Caseys Camera is considering eliminating Model AE1 from its camera line because of losses

over the past quarter. The past three months of information for model AE1 is summarized

below:

Sales (1,000 units)

$250,000

Manufacturing costs:

Direct materials

150,000

Direct labour ($15 per hour)

30,000

Support

100,000

Operating loss

($30,000)

Support costs are 85% variable and the remaining 15% is depreciation of special equipment for

model AE1 that has no resale value.

Should 5K Camera eliminate Model AE1 from its product line? Why or why not? Support your

answer with calculations.