Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement follows: Line Item Description Torch Elk Walloon Total Sales revenue $350,000,000 $50,000,000 $80,000,000 $480,000,000 Less: Variable expenses 300,000,000 10,000,000 60,000,000 370,000,000 Contribution margin $ 50,000,000 $ 40,000,000 $ 20,000,000 $ 110,000,000 Less direct fixed expenses: Depreciation 12,000,000 7,000,000 5,000,000 24,000,000 Advertising 21,000,000 10,000,000 30,000,000 61,000,000 Segment margin $ 17,000,000 $ 23,000,000 $ (15,000,000) $ 25,000,000 Direct fixed expenses consist of depreciation and advertising. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Assume that each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product were dropped. Assume that 30% of the Torch customers choose to buy from Charlevoix because it offers a full range of products, including Walloon. If Walloon were no longer available from Charlevoix, these customers would go elsewhere to purchase Torch. Required: 1. Conceptual Connection: Estimate the impact on profit that would result from dropping Walloon. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Decrease fill in the blank 1 of 1$ 90,000,000 2. Conceptual Connection: Should Charlevoix keep or drop Walloon? Keep 3. Conceptual Connection: Charlevoix's CFO decided to use the results of studying historical data from several key customers (e.g., Torch, etc.) to forecast the percentage of business the company likely would lose from its other customers if it were to stop making Walloon. Briefly explain the data analytic type represented by the CFO's attempt to better forecast the future behavior of its key customers. [Refer to Exhibit 2-2] This use of historical customer behavior data represents an example of a predictive data analytic. Feedback Area Feedback Look at contribution margin and adjust for dropping product line. Consider the sunk cost and that it is not relevant.