1. A company has three product lines, one of which reflects the following results:

Sales $215,000

Variable expenses 125,000

Contribution margin 90,000

Fixed expenses 120,000

Net loss $ (30,000)

If this product line is eliminated, 55% of the fixed expenses can be eliminated and the other 45% will be allocated to other product lines. If management decides to eliminate this product line, the companys Net Income will increase/decrease by ____________.

2. Calc, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 900 baskets in production each month. The costs of making one basket is $4 for direct materials, $4 for variable manufacturing overhead, $3 for direct labor, and $6 for fixed manufacturing overhead. The unit cost is based on the monthly production of 900 baskets. The company determined that 45% of the fixed manufacturing overhead is avoidable. An outside supplier has offered to sell Calc the baskets for $12 each, and can supply all the units it needs. Prepare an incremental analysis to determine if Calc should buy the baskets from the supplier. Calculate the impact on Net Income if 900 baskets were purchased from the outside supplier, and indicate whether or not Calc should make or buy the baskets.