LO 7-2, 7-5 PB7-3 Analyzing Keep-or-Drop Decision Greenview Corp. (see PB7-1 and PB7-2) is considering eliminating a product from its line of outdoor tables. Two products, the Sunrise and Noche tables, have impressive sales. However, sales for the Blanco model have been dismal Page 343 Information related to Greenview's outdoor table line is as follows Segmented Income Statement for Greenview's Outdoor Table Products Blanco Sunrise Noche Total $110,000 $77,000 $33,000 $220,000 Sales revenue Variable costs 77,000 52,000 25,500 154,500 $ 33,000 $25,000 $ 7,500 $ 65,500 Contribution margin Less: Direct fixed costs 3,200 2,400 3,000 8,600 Segment margin $29,800 $22,600 $ 4,500 $ 56,900 Common fixed costs* 16,800 11,760 5,040 33.600 13,000 $10840 $ (540) $ 23,300 Net operating income (loss) *Allocated based on total sale revenue Greenview has determined that eliminating the Blanco model will cause sales of the Sunrise and Noche tables to increase by 10 percent and 5 percent, respectively. Variable costs for these two models will increase proportionately. Direct fixed costs are avoidable, but common fixed costs will remain unchanged Required: 1. Will Greenview's net operating income increase or decrease if the Blanco model is eliminated? By how much? 2. Should Greenview drop the Blanco model? 3. Suppose Greenview had $3,800 of direct fixed overhead that was traceable to the Blanco model. Would your recommendation to Greenview change? Why or why not