Ashton Home Furnishings manufactures hutches, tables and beds in a modern plant located in beautiful, historic Ashton. The following sales and cost information is available relating to the profitability of these three product lines:

HutchesTablesBedsSales $ 750,000 $ 500,000 $ 1,000,000Costs: Direct materials 300,000 220,000 400,000 Direct labour 75,000 60,000 80,000 Material handling 45,000 40,000 60,000 Amortization 50,000 48,000 72,000 Selling & marketing 75,000 60,000 120,000 General administration 150,000 100,000 200,000Total costs 695,000 528,000 932,000Operating income 55,000 (28,000) 68,000

The following additional information has been made available to you:

Direct materials and direct labour vary directly with the number of units produced.

Material handling costs vary directly with the number of units produced.

Amortization is calculated using the straight-line method.

50% of the selling and marketing costs consist of corporate marketing costs and are allocated to the product lines based on relative product line sales. The balance of the selling and marketing costs is comprised of variable sales commissions.

General administration costs include product line manager salaries which are $60,000 for hutches line, $50,000 for the tables line and $65,000 for the beds line. The balance is made up of costs that are allocated from head office and are not directly related to the product lines.

If the tables product line is dropped, then its manager would be transferred to head office where she would replace a $40,000 per year accounting clerk.

Required:

Assuming that the plant space taken up by the tables product line would remain idle, should the product line be dropped? Your answer should only consider quantitative factors and you must show all your calculations.

Assuming that the plant space taken up by the tables product line could be rented out for $50,000 per year, would your answer that you provided in part 1 change? Show calculations.

Ignore your answer in part 2. Assuming that the idle space could be used by the beds product line and that its sales would increase by $300,000, should the company discontinue the tables product line? Show calculations.

Ignoring the additional information provided in parts 2 and 3, identify two qualitative factors that the company should consider before deciding to discontinue the tables product line