Keith Inc. has 4 product lines: sour cream, ice cream, yogurt, and butter. Demand of individual products is not affected by changes in other product lines. 40% of the fixed costs are avoidable, and the other 60% are allocated. Results of June follow:

Prepare an incremental analysis of the effect of dropping the Sour Cream product line. Should the Sour Cream product line be retained or eliminated, and what is the amount of incremental net income or net loss that would result from eliminating the product line?

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Sour Cream 2,000 $10,000 6,000 7,000 $(3.000) Yogurt 400 $10,000 4,200 3,000 $ 2.800 Ice Cream 500 $20,000 13,000 2,000 $ 5.000 Butter 200 Total 3,100 $60,000 28,000 19,000 Units sold Revenue Variable departmental costs Fixed costs Net income (loss) $20,000 7,000 $8.200 $13.000