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Mr. Earl Pearl, accountant for Margie Knall, Inc have prepared the following product-line income data:

 

    PRODUCT
  Total A B C
Sales $100,000 $50,000 $20,000 $30,000
Variable expenses $60,000 $30,000 $10,000 $20,000
Contribution margin $40,000 $20,000 $10,000 $10,000
Fixed expenses:        
Rent $5,000 $2,500 $1,000 $1,500
Depreciation $6,000 $3,000 $1,200 $1,800
Utilities $4,000 $2,000 $500 $1,500
Supervisors' salaries $5,000 $1,500 $500 $3,000
Maintenance $3,000 $1,500 $600 $900
Administrative expenses $10,000 $3,000 $2,000 $5,000
Total fixed expenses $33,000 $13,500 $5,800 $13,700
Net operating income $7,000 $6,500 $4,200 ($3,700)

 

The additional information below is available:

-The factory rent of $1,500 assigned to Product C is avoidable if the product is dropped.

-The company's total depreciation would not be affected by dropping Product C.

-Eliminating Product C will reduce the total monthly utility bill from $4,000 to $3,000.

-All supervisory salaries for Product C would be avoidable.

-If Product C is discontinued, the maintenance department will be able to reduce total monthly expenses from $3,000 to $2,200.

-Elimination of Product C will make it possible to cut two persons from the administrative staff Currently, their combined salaries total $2,500.

Required:

Prepare an analysis showing whether Product C should be eliminated.

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