Al Wihdeh Industries manufactures several products in a single factory.

The following data are collected for three of these products:

	ThingOne	ThingTwo	ThingThree
Selling Price	$3.80	$6.00	$7.50
Manufacturing cost per unit
Direct materials	$1.50	$1.75	$3.00
Direct labor	$0.50	$0.50	$0.75
Overhead	$1.00	$1.00	$1.50
Total	$3.00	$3.25	$5.25
Direct marketing costs	$75,000	$775,000	$150,000
Units sold	100,000	250,000	50,000

Additional information are as follows:

1. Other products now use $200,000 a year in direct labor cost.

2. Factory supervision costs will be $25,000 less if total direct labor cost fall below $300,000 a year.

3. Indirect labor, indirect materials, and power costs are proportionately variable with direct labor costs.

4. Pensions and payroll taxes are calculated at 20% of total labor cost

5. Heat and light, depreciation, and taxes and insurance are wholly fixed.

6. Half of the miscellaneous overhead costs at normal volume are variable.

7. Marketing and administrative costs other than those directly traceable to individual product lines amount to $300,000 a year. These costs would be the same even if none of these three products are marketed.

8. The direct marketing costs of ThingThree include $50,000 to amortize the costs incurred to develop this product initially. This cost will be completely amortized three years from now.

Required:

a. Based on the companys method of product costing, which of these products appear to be profitable.

b. Judging solely from the information provided in this problem, would you recommend that any of these three products be discontinued? Show your calculations.

c. If any product appeared to be unprofitable in your answer to (a) but worth continuing in your answer to (b), under what circumstances would you consider withdrawing it from the market?