(25 points) Susan Delaney analyzes product profitability of one of her clients using the following data (same data as in the previous questions):

2013 2014 2015

Overhead costs 110,000 120,000 100,000

Direct labor 25,000 30,000 20,000

Now, she tries to understand profitability of Products 4 and 5. Their sales prices and costs per unit remained unchanged during these years at:

Product 4Product 5Sales price (per unit)80130Direct material cost1020Direct labor cost1020

Assume fixed non-avoidable overhead is 60,000 in all years and the remaining overhead is variable (perfectly proportional to direct labor). What happens if Product 5 is dropped in 2015?

Group of answer choices

Gross margin goes down by 20 for every unit dropped.

Gross margin goes down by 40 for every unit dropped.

Gross margin goes down by 130 for every unit dropped.

Net operating income goes down by 50 for every unit dropped.

Net operating income goes down by 90 for every unit dropped.

Net operating income goes up by 10 for every unit dropped.

Variable costs go down by 40 for every unit dropped.

Overhead costs go down by 100 for every unit dropped.

Overhead costs go down by 60 for every unit dropped

Overhead costs remain unchanged.

None of these.