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 25 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost. Manufacturing overhead for year 1 totaled $630,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following. Sales revenue Direct materials Direct labor Chairs $1,106,400 586,000 140,000 Desks $2,033,200 820,000 310,000 Required: a-1. Based on the CFO's new policy, calculate the margin (as defined by the new CFO) for both chairs and desks. a-2. Which of the two products should be dropped? 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 $670,000. 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? Req A1 Req A2 Req B Based on the CFO's new policy, calculate the profit margin for both chairs and desks. Profit Margin % Chairs Desks % Req A1 Req A2 Req B Which of the two products should be dropped? Chairs O Desks Reg A1 Req A2 Req 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 $670,000. 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? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) Show less A Estimated margin for desks - Year 2