Mr. Earl Pearl, accountant for Margie Knall Co., Inc., has prepared the following product-line income data:

			Product
	Total		A		B		C
Sales	$	92,000	$	42,000	$	25,000	$	25,000
Variable expenses		55,700		26,900		9,900		18,900
Contribution margin		36,300		15,100		15,100		6,100
Fixed expenses:
Rent		3,500		1,200		900		1,400
Depreciation		4,500		1,700		1,100		1,700
Utilities		3,450		1,300		750		1,400
Supervisors' salaries		4,650		1,000		750		2,900
Maintenance		2,680		1,000		850		830
Administrative expenses		8,500		1,700		1,900		4,900
Total fixed expenses		27,280		7,900		6,250		13,130
Net operating income	$	9,020	$	7,200	$	8,850	$	(7,030)

The following additional information is available:
	The factory rent of $1,100 assigned to Product C is avoidable if the product were dropped.
	The company's total depreciation would not be affected by dropping C.
	Eliminating Product C will reduce the monthly utility bill from $1,400 to $1,100.
	All supervisors' salaries are avoidable.
	If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $2,680 to $2,300.
	Elimination of Product C will make it possible to cut two persons from the administrative staff; their combined salaries total $1,100.

Required:
1.	Calculate the advantage or disadvantage in dropping Product C. (Input the amount as a positive value. Omit the "$" sign in your response.)

in dropping Product C

$

2.

Should the product be dropped?

Yes

No 2. Janes, Inc., is considering the purchase of a machine that would cost $520,000 and would last for 7 years, at the end of which, the machine would have a salvage value of $52,000. The machine would reduce labor and other costs by $112,000 per year. Additional working capital of $6,000 would be needed immediately, all of which would be recovered at the end of 7 years. The company requires a minimum pretax return of 14% on all investment projects. (Ignore income taxes.) http://lectures.mhhe.com/connect/0078111005/Exhibit/Exhibit%2013B-2.jpg http://lectures.mhhe.com/connect/0078111005/Exhibit/Exhibit%2013B-1.jpg Determine the net present value of the project.