6.(TCO H) Mr. Earl Pearl, accountant for Margie Knall, Inc. has prepared the following product-line income data.

PRODUCT

Total A B C

Sales................................................$ 100,000........$50,000.........$20,000...........$30,000

Variable expenses..............................60,000..........30,000............10,000.............20,000

Contribution margin............................. .40,000..........20,000............10,000.............10,000

Fixed expenses:

Rent................................................. .5,000...........2,500..............1,000...............1,500

Depreciation..................................... 6,000...........3,000..............1,200................1,800

Utilities.............................................4,000...........2,000.................500................1,500

Supervisors' salaries.......................5,000.......... 1,500.................500................3,000

Maintenance....................................3,000...........1,500..................600..................900

Administrative expenses................10,000...........3,000.................2,000..............5,000

Total fixed expenses........................33,000..........13,500...............5,800.............13,700

Net operating income........................ $7,000..........$6,500.............$4,200............($3,700)

The additional information below is available.

oThe factory rent of $1,500 assigned to Product C is avoidable if the product is dropped.

oThe company's total depreciation would not be affected by dropping Product C.

oEliminating Product C will reduce the total monthly utility bill from $4,000 to $3,000.

oAll supervisory salaries for Product C would be avoidable.

oIf Product C is discontinued, the maintenance department will be able to reduce total monthly expenses from $3,000 to $2,200.

oElimination of Product C will make it possible to cut two persons from the administrative staff. Currently, their combined salaries total $2,500.

Required: Prepare an analysis showing whether Product C should be eliminated. Provide numerical support for your findings.(Points : 30)