Problem 1: Add / Drop The Big Pool Company makes swimming pools in three sizes - small, medium and large. Data on sales and expenses for the quarter are: Sales Total Small Medium $ 300,000 $ 90,000 $ 150,000 $ 120,000 27.000 60,000 180,000 63,000 90,000 Large 60,000 33,000 27,000 Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable 6,000 30,000 23,000 10,000 6,000 Depreciation of special equipment 14,000 9,000 13,000 8,000 Salaries of product-line managers 12,000 10,000 Allocated common fixed expenses 35,000 60,000 148,000 18,000 46,000 30,000 66.000 12,000 36,000 Total fixed expenses Net operating income (loss) $ 32,000 $ 17,000 $ 24,000 S (9,000) *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the large pools and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce large pools has no resale value and does not wear out