Question 3 Toymaker Inc. is trying to decide whether to keep or drop one of its toy product lines called Baby Mustang. The company's segmented income statement shows that this product is generating a net loss. As follows Sales Revenue $ 1oo, ooo Less : Var iable costs 70, 000 Contribution margin 30, 000 Less : Fixed Costs 40, 000 Net operating loss (10000) If Baby Mustang toy is dropped The vacated space will be remodeled at a cost of 12, 000 and will be devoted to an expanded line of high-end toys. Contribution of the high-end toys are expected to be 60,000 on an annual basis. Toymaker Inc. can cut its fixed costs by 40 percent. Remaining fixed costs will continue to be incured. Customers who purchased Baby Mustang toy often bought Big Brother Mustang toy. Contribution margin of Big Brother Mustang are expected to fall by $9, 000. The firm will increase advertising expenditures by $5,000 to promote the high-end toys. Required Should Mattel close its Baby Mustang line? (5 Mar ks) (Show computation, in total, to support your answer)