Case study 3 Exclusive Ltd produces three different products: Beta, Gamma, Delta. The revenue, contribution margin and the fixed costs allocated to the three products are as follows: Particulars Beta Gamma Delta Sales revenue $1,000,000 $800,000 $200,000 Contribution margin ratio 40% 30% 25% Fixed costs $340,000 $180,000 $90,000 Delta product line absorbs $50,000 of organisational fixed costs, while $40,000 are fixed costs directly attributable to the production of Delta units. The CFO of Exclusive Ltd has been highlighting to the CEO and the Chairman of the board that the Delta product line has been making losses in several quarters over the last 5 years. Hence, the management wishes to consider the following two alternatives: (i) Discontinue the Delta product line to avoid the loss. (ii) Discontinue the Delta product line and utilise the capacity to manufacture product Rho. In this case, sales revenue from product Rho is estimated to be $200,000 and the contribution margin ratio for Rho is estimated to be at 35%. The fixed costs directly attributable to Rho would be the same as the fixed cost directly attributable to Delta. As an expert on cost analysis, you are approached by the CFO of Exclusive Ltd to conduct a detailed analysis of the two alternatives available for the management and to provide appropriate recommendations. Required (a) Determine the current product-wise and overall profitability for Exclusive Ltd by preparing a marginal costing income statement. (b) Evaluate the option (i) listed above in the case study and note down any observations based on your analysis. Show detailed calculations. (c) Evaluate alternative (ii) listed above in the case study and note down your observations based on your analysis and provide a final recommendation for the management of Exclusive Ltd as to which of the two alternatives would be most beneficial for the company. Support your recommendation with detailed calculations.