Question $7(6$ points$)$

Managers are considering dropping a premium product line after a series of losses. Assume that dropping the premium line would save $$30,000$ in fixed manufacturing costs.

Based on the information, answer the following:

$\backslash$table$[[\backslash$table$[[$Kharak Engineering Income Statement$],[$For the Year Ended December $31,2024]]],[,$Total,Basic,Premium$],[$Net Sales Revenues,$425,000,305,000,120,000],[$Variable Costs,$246,000,152,000,94,000],[$Contribution Margin,$179,000,153,000,26,000],[$Fixed Costs:,,,$],[$Manufacturing$,125,000,69,000,56,000],[$Selling and Administrative,$72,000,59,000,13,000],[$Total fixed costs:,$197,000,128,000,69,000]]$

Blank $1$: What is the change in operating income if the premium line is dropped?

Blank $2$: Based on purely quantitative data, should they drop this line?

Blank # $1$

A

Blank # $2$ A$)$