Managerial Accounting Question

Williams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has been experiencing losses on the knapsacks for some time, as shown by the contribution format income statement below: WILLIAMS PRODUCTS INC. Income Statement-School Knapsacks For the Quarter Ended June 30 Sales $290,000 Variable expenses: Variable manufacturing expenses $ 81,200 Sales commissions 31,900 Shipping 8,700 Total variable expenses 121,800 Contribution margin 168,200 Fixed expenses: Salary of product-line manager 11,250 General factory overhead 57,850* Depreciation of equipment (no resale value) 22,000 Advertising-traceable 53,950 Insurance on inventories 4,800 Purchasing department 33,640 T Total fixed expenses 183,490 Operating loss $ (15,290) *Allocated on the basis of machine-hours. Allocated on the basis of sales dollars.Discontinuing the knapsacks would not affect sales of other product lines and would have no noticeable effect on the company's total general factory overhead or total purchasing department expenses. Required: a. Compute the increase or decrease of net operating income if the Williams Products Inc line is continued or discontinued. (Input all amounts as positive except Decreases in Sales, Decreases in Contribution Margin, and Net Losses which should be indicated by a minus sign.)Difference: Keep School |Drop School Operating Knapsack Knapsack Income Increase or (Decrease) Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses 0 0 Contribution margin 0 0 Fixed expenses: Salary of product-line manager General factory overhead Depreciation of equipment Advertising-traceable Insurance on inventories Purchasing department Total fixed expenses 0 Operating loss $ 0 0 0 b. Would you recommend that the Williams Products Inc line be discontinued