Mercer has three product lines in its retail stores: books, videos, and music. Results of the fourth quarter are presented below:

Books Music Videos Total

Units sold 1,000 2,000 2,000 5,000

Revenue $20,000 $40,000 $25,000 $85,000

Variable departmental costs 17,000 22,000 12,000 51,000

Direct fixed costs 1,000 3,000 2,000 6,000

Allocated fixed costs 7,000 7,000 7,000 21,000

Net income (loss) $(5,000) $8,000 $4,000 $7,000

The allocated fixed costs are unavoidable. Demand of individual products are not affected by changes in other product lines.

Discuss: Books seem like an unprofitable division. Should we eliminate this division? Why or why not? What factors should we consider?