The Foch Corp. has two product lines: Somme and Verdun. Data for these two product lines is shown below:

A. Assuming that all of the fixed costs allocated to Verdun are avoidable if the product line is dropped, should Foch drop this line? Explain.
B. If the fixed costs allocated to Verdun are not avoidable, should Foch drop this product line? Explain.

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Sales revenue Variable expenses Fixed expenses, allocated based on revenue Operating income or loss Total Somme Verdun $1,300,000 $1,200,000 $100,000 $880,000 $790,000 $90,000 $390,000 $360,000 $30,000 $30,000 $50,000 ($20,000)