Fleur runs a bookshop and is reviewing the profitability of her product sales. She allocates the rent and staff costs on a sales revenue basis, but promotional expenses are directly incurred by each product group. If she were to discontinue any of her product lines, she would be able to save some rent of £50,000 by sub-leasing the space Out to a coffee shop. She would also save the cost of two part-time members of staff, at a cost of £25,000 per year.

REQUIRED:
Using the information in Table 14.12, calculate the profitability by product group and then compare it to a contribution analysis to assess which product group should be discontinued.

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Table 14.12 Book product group: revenue and cost data Adult Children Educational Sales revenue 746,000 568,000 342,000 Cost of goods sold 373,000 430,800 102,600 Rent of shop 148,659 113,187 68,154 Shop staff 33,786 25,724 15,490 Promotional expenses 22,500 42,500 10,200