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1. Keep or drop a product line: The management of the Flyin' Illini T-Shirt Co. has been concerned for some time with the financial performance
1. Keep or drop a product line: The management of the Flyin' Illini T-Shirt Co. has been concerned for some time with the financial performance of its Grey t-shirt line and has considered discontinuing it on several occasions. Accounting information for the firm for last accounting period appears below: Sales Variable manufacturing costs Fixed manufacturing costs Gross Margin Variable non-manufacturing costs Fixed non-manufacturing costs Net Operating Income (Loss) Orange $1,749,370 $706,115 $571,085 $472,170 $175,825 $181,950 $114,395 Blue $1,331,325 $519,040 $488,210 $324,075 $ 101,450 $156,595 $66,030 Grey $922,450 $528,500 $207,000 $186,950 $92,420 $153,400 ($58,870) The accountant for the company estimates that $15,000 of the fixed manufacturing expenses and $80,000 of the fixed non-manufacturing expenses could be avoided each accounting period if the Grey t-shirt line discontinued. Assume all variable costs could be avoided if the Grey t-shirt line is discontinued and that dropping the Grey t-shirt line would have no effect on the other t-shirt lines. What would be the financial advantage (disadvantage) from dropping the Grey t-shirt line? You must show all of your work
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