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Mr. Earl Pearl, accountant for Margie Knall Co., Inc., has prepared the following product-line income data:
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Product
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Total
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A
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B
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C
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Sales
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$
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112,000
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$
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50,000
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$
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26,000
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$
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36,000
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Variable expenses
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61,800
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30,600
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10,600
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20,600
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Contribution margin
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50,200
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19,400
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15,400
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15,400
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Fixed expenses:
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Rent
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6,800
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3,100
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1,600
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2,100
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Depreciation
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7,800
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3,600
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1,800
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2,400
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Utilities
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5,260
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2,600
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560
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2,100
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Supervisors' salaries
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6,260
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2,100
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560
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3,600
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Maintenance
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3,720
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2,100
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660
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960
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Administrative expenses
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11,800
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3,600
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2,600
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5,600
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Total fixed expenses
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41,640
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17,100
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7,780
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16,760
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Net operating income
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$
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8,560
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$
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2,300
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$
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7,620
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$
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(1,360)
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The following additional information is available:
The factory rent of $1,560 assigned to Product C is avoidable if the product were dropped.
The company's total depreciation would not be affected by dropping C.
Eliminating Product C will reduce the monthly utility bill from $2,100 to $860.
All supervisors' salaries are avoidable.
If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $3,720 to $2,600.
Elimination of Product C will make it possible to cut two persons from the administrative staff; their combined salaries total $3,600.
Required:
1. Calculate the advantage or disadvantage in dropping Product C. (Input the amount as a positive value. Omit the "$" sign in your response.)
2. Should the product be dropped?
Yes or No