ACL Group Ltd. has three major product lines, soda, juice, and flavored water.ACL is considering discontinuing producing flavored water because the divisional income statement indicates it is being sold at a loss.The most recent annual income statement is outlined below:

SodaJuiceFlavored Water

(000s)(000s)(000s)

Sales$48,330 $44,980 $26,230

Variable Costs16,50019,600 12,700

Fixed Costs21,80024,40018,300

Operating Income$10,030 $980 ($4,770)

The fixed costs include fixed costs directly attributable to each product line as well as allocated common costs.The portion of directly attributable fixed costs included in fixed costs is 40% for soda, 75% for juice and 55% for flavored water.

Required:

Should ACL Group Ltd. discontinue the product line of flavored water? Explain why or why not.Show all supporting calculations.