ABC Corporation makes three different products. Data concerning these products appear below:

	Product A	Product B	Product C
Sales Volume	200,000	400,000	800,000
Selling Price Unit	$3.30	$3.00	$1.70
Variable cost per unit	$2.50	$1.40	$0.50

Total fixed expenses are $800,000 per year. The company has no beginning or ending work in process or finished goods inventories. Required:

a. What is the corporations current operating income?

b. What is the corporations over-all break-even point in dollar sales?

c. What is the corporations current operating leverage and what does it imply?

d. Of the total fixed expenses of $800,000, $40,000 could be avoided if Product A is dropped, $160,000 if Product B is dropped, and $120,000 if Product C is dropped. The remaining fixed expenses of $480,000 consist of common fixed expenses such as administrative salaries and rent on the production facility that could be avoided only by going out of business entirely.

i What is the break-even point in unit sales for each product line?

ii Should any of these product lines be dropped? Explain why or why not.

iii. If the corporation sells exactly the break-even quantity of each product, what will be the overall profit of the company? Explain this result.