Cornwall Valve Company is a small manufacturer of industrial valves. It manufactures three types of valves. It has been profitable for many years and has historically operated at 100% capacity. In the last year, quality problems with the C valve hasresulted in a reduction in the number of units sold and the costs to manufactured have increased. It has shown a loss in the last quarter and Ranbir Singh, the Senior Accountant, recommended that this valve be dropped from its product lines. It is expected that if the valve is discontinued, sales of the A valve will increase by 10%. Financial details relating to the most recent quarter are included below: Cornwall Valve Company Income Statement for 2nd Quarter of 2021 (in $000's) # units Sales Cost of goods sold Gross profit Selling & admin expenses Income (loss) A Yalve B Yalve C Yalve 8.0 10.0 4.8 4,800 3,400 2,880 3,144 2,310 2.736 1,656 1,090 144 1,110 555 405 546 535 (261) Other Financial Information: A Yalve B Yalve C Yalve On a per unit basis: Selling price 600 340 600 Direct material 95 51 150 Direct labour 120 60 180 Variable manufacturing overhead 115 90 180 Fixed manufacturing overhead 45 30 60 Variable shipping costs 30 12 30 Included in fixed manufacturing overhead is: 1. Depreciation - the equipment is used in the manufacture of all valves. 2.Fork lift operator - each product line has its own forklift driver who is paid $40,000 annually. The Cvalve operator would be terminated. 3. None of the other fixed costs would change if the C valve was dropped. Included in selling & administrative expenses are: 1. Variable selling expenses (which were discussed above) 2. Advertising expenses per quarter for the Cvalve are comprised of: a. Corporate advertising allocated to the product lines based on sales. b. $30,000 of advertising related specifically to the C Valve product. c. One accounts payable clerk who earns $31.000 annually would be laid off in the C valve was dropped. d. The salespersons compensation is included in variable selling expenses. Required (Show calculations or use formulae) 1. Should Cornwall Valve Company drop the C Valve based on the 2nd quarter's Financial data. 2. In your opinion, would laying off all the direct abour staff be ethical? Why or why not