Structuring a Keep-or-Drop Product Line Problem

Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines:

	Strip		Plank		Parquet		Total
Sales revenue	$400,000		$200,000		$300,000		$900,000
Less: Variable expenses	225,000		120,000		250,000		595,000
Contribution margin	$175,000		$ 80,000		$ 50,000		$305,000
Less direct fixed expenses:
Machine rent	5,000		20,000		42,000		67,000
Supervision	15,000		10,000		20,000		45,000
Depreciation	35,000		10,000		25,000		70,000
Segment margin	$120,000		$ 40,000		$ (37,000)		$123,000

Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $50,000 (sales of $300,000 less total variable costs of $250,000). All variable costs are relevant. Relevant fixed costs associated with this line include $42,000 in machine rent and $5,200 in supervision salaries.

. Which alternative is more cost effective and by how much?

By $?