Country Co. has two departments: ABC, and XYZ, which produce high quality hockey sticks. The company has provide the following information for the month of April: $ Sales Variable Costs Contribution Margin Fixed Expenses Operating Income (Loss) ABC XYZ Total 7,500,000 $ 2,200,000 $ 9,700,000 3,800,000 900,000 4,700,000 3,700,000 1,300,000 5,000,000 3,000,000 1,500,000 4,500,000 700,000 - 200,000 500,000 Country Co. has conducted an analysis of the costs involving XYZ after a poor performance in April and it was determined that the following would occur if the XYZ department ceased operations: 1. $500,000 in fixed expenses of XYZ would be eliminated by ceasing operations. The remaining $1,000,000 are sunk costs that cannot be recovered. 2. The sales in the ABC department would increase 10% if XYZ were to cease operations. REQUIRED A) What would be the effect on operating income if the XYZ product line is dropped? (5 marks) B) should the XYZ product line be dropped? Briefly explain. (1 mark) C) Unrelated to parts A & B of this question, Country Co. is considering using the excess wood used in the production of their hockey sticks to create shooting targets. Currently, the company sells the additional wood for $5.50 per kilogram. If processed into shooting targets, it would cost an additional $6.50 per unit to process and would use 3kg of wood to create. These shooting targets could sell for $30 per target. Currently, the company has 1,500 kilograms of wood that they sell. Should Country make these new shooting targets? (4 marks)