Swanton Company currently sells three products: desk calendars, pen sets, and paper-clip holders. The company is thinking of discontinuing the production and sale of paper-clip holders. However, because many customers buy the products as a set, Swanton estimates that the sales of the other two products will decrease by 20% if the paper-clip holders are discontinued.
Current data on each of the three products are provided below.

1. What is the segment margin of the paper-clip holders?
2. Interpretive Question: Would you recommend dropping the paper-clip holder product line? Why or whynot?

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Desk Calendars Paper-Clip Pen Sets Holders Total 40,000 14,000 20,000 Units Sales revenue Variable costs Direct fixed costs Indirect fixed costs $280,000 160,000 S240,000 $42,000 $562,000 65,000 80,000 20,000 40,000 5,000 10,000 30,000