A merchandising company currently sells three products - A, B, and C. Product profit reports for the last period are shown below: Product Product B Product C Total $100,000 $200,000 $150,000 $450,000 Sales Less: Variable cost of goods sold Fixed cost of goods sold Gross margin Less: Variable selling and admin. Fixed selling and admin. Profit 40,000 20,000 $40,000 80,000 40,000 $80,000 60,000 30,000 $60,000 180,000 90,000 $180,000 10,000 40,000 ($10,000) 20,000 40,000 $20,000 15,000 40,000 $5,000 45,000 120,000 $15,000 A cost analysis reveals that variable cost of goods sold is 40% of sales. Total fixed cost of goods sold are facility-sustaining costs which cannot be eliminated if Product A is dropped. Facility- sustaining costs equal $90,000 and are allocated to products based on a percentage of sales. Variable selling and administrative expenses are 10% of sales. Total fixed selling and administrative expenses are facility-sustaining costs which cannot be eliminated if Product A is dropped. Facility-sustaining costs equal $120,000 and are allocated equally over each product line. 1. Should the company keep (retain) or drop Product A? 2. If Product A is dropped, what would be the total profit for Products B and C? 3. Discuss additional factors the company should consider before deciding whether to retain Product A or drop it