McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 15 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost. Manufacturing overhead for year 1 totaled $880,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following: Chairs Desks Sales revenue Direc: materials Direct labor $1,001,000 $2,469,600 598,000 120,000 940,000 430,000 Required: a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks. 91% 161% Chairs Desks a-2. Which of the two products should be dropped? O Chairs Desks b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $790,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2 (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.) desks