E26-2 Top managers of New Rock Records are alarmed about their operating losses. They are considering dropping the cassette-tape product line. Company accountants have prepared the following analysis to help make this decision: Total Compact Discs Cassette Tapes Sales revenue. $480,000 $290,000 $190,000 Variable expenses. 240,000 140,000 100,000 Contribution margin. 240,000 150,000 90,000 Fixed expenses: Manufacturing. 165,000 70,000 95,000 Marketing and administrative. 85,000 55,000 30,000 Total fixed expenses 250,000 125,000 125,000 Operating income (loss). $(10,000) $ 25.000 $(35,000) Total fixed costs will not change if the company stops selling cassette tapes. Prepare an incremental analysis to show whether New Rock should drop the cassette- tape product line. Will dropping cassette tapes add $35,000 to operating income? Explain.