Gonsalvez company has three product A,B and C. The following is available :

A. B. C

S

ales. $60 000. $38 000. $26 000

Variable costs. 36000. 18000. 12000

Contribution margin. 24000. 20000. 14000

Fixed expenses. 12000. 15000. 16000

Profit (loss). $ 12000. $5000. $(2000)

Gonsalvez company is thinking of dropping product line C because it is reporting an operating loss. Assuming fixed cost are avoidable, if Gonsalvez company drops product line C and does not replace it, what effect will this have on profit? What will be the over all profit of the organisation. Show calculation and provide your justification.