Keep-or-Drop Decision

Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows:

		Alanson		Boyne		Conway		Total
Sales revenue		$1,280		$185		$405		$1,870
Less: Variable expenses		1,115		45		304		1,464
Contribution margin		$165		$140		$101		$406
Less direct fixed expenses:
	Depreciation	50		15		11		76
	Salaries	95		85		112		292
Segment margin		$20		$40		$(22)		$38

Direct fixed expenses consist of depreciation and plant supervisory salaries. 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 supervisor whose position would remain if the associated product were dropped.

Required:

CONCEPTUAL CONNECTION: Estimate the impact on profit that would result from dropping Conway. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Decrease $_______

Should Petoskey keep or drop Conway? Keep

PLEASE EXPLAIN STEP BY STEP.