Keep-Or-Drop Decision, Alternatives, Relevant Costs

Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below.

		Model 1		Model 2		Model 3		Total
Sales		$250,000		$554,000		$606,000		$1,410,000
Less variable costs of goods sold		(100,000)		(162,320)		(354,000)		(616,320)
Less commissions		(4,400)		(40,000)		(22,750)		(67,150)
Contribution margin		$145,600		$351,680		$229,250		$726,530
Less common fixed expenses:
Fixed factory overhead								(410,000)
Fixed selling and administrative								(275,000)
Operating income								$41,530

While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered:

						Driver Usage by Model
Activity	Activity Cost				Activity Driver	Model 1				Model 2				Model 3
Engineering		$83,000			Engineering hours		770				80				150
Setting up		183,000			Setup hours		12,800				12,200				29,150
Customer service		116,000			Service calls		13,600				1,420				19,150

In addition, Model 1 requires the rental of specialized equipment costing $21,000 per year.

Required:

3. What if Reshier Company can only avoid 170 hours of engineering time and 5,400 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 2? Which alternative is more cost effective and by how much? Do NOT round interim calculations and, if required, round your answer to the nearest dollar.

Keeping Model 1 will add $?????? to operating income

I keep getting $32359 and it says it is wrong. Please also provide calculations. Thank you!