Dropping a product line. Gateway Products currently operates at 75 percent capacity.

Worried about the company's performance, the general manager segmented the company's income statement product by product and obtained the following picture:

Should Gateway Products drop Product C. given that doing so would eliminate Product C's sales and variable costs and reduce the company's total fixed costs by $5,000?

Transcribed Image Text:

Product Sales Less Variable Costs Total Contribution Margin Less Fixed Costs A B C $20,000 $30,000 $40,000 15,000 22,000 34,000 $ 5.000 3,000 Net Operating Profit (Loss) $ 2,000 $ 8.000 5,000 $ 3,000 $ 6,000 7.000 $ (1,000)