ONeil Enterprises produces a line of canned soups for sale at supermarkets across the country. Demand has been soft recently and the company is operating at 70 percent of capacity. The company is considering dropping one of the soups, beef barley, in hopes of improving profitability. If beef barley is dropped, the revenue associated with it will be lost and the related variable costs saved. The CFO estimates that the fixed costs will also be reduced by 25 percent.

The following product line statements are available:

indicate whether ONeil should drop the beef barley line.

When the product manager for the minestrone soup hears that managers are considering dropping the beef barley line, she points out that many ONeil customers buy more than one soup flavor and if beef barley is not available from ONeil, some of them might stop buying the other soups as well. She estimates that 5 percent of the current sales of both broth and minestrone will be lost if beef barley is dropped. Would that change your answer in requirement

\begin{tabular}{|c|c|c|c|} \hline Product & Broth & Beef Barley & Minestrone \\ \hline Sales ... & $32,600 & $42,800 & $51,200 \\ \hline Variablecosts..................Contributionmargin & $10,60022,000 & $4,20038,600 & $11,10040,100 \\ \hline Fixedcostsallocatedtoeachproductline & 4,700 & 6,000 & 7,100 \\ \hline Operating profit (loss)....... & $5,900 & $(1,800) & \\ \hline \end{tabular} \begin{tabular}{lrrrr} & Broth & Beef Barley & Minestrone & \multicolumn{1}{c}{ Totals } \\ Sales & 32,600.00 & 42,800.00 & 51,200.00 & 126,600.00 \\ VC & 22,000.00 & 38,600.00 & 40,100.00 & 100,700.00 \\ Contribution Margin & 10,600.00 & 4,200.00 & 11,100.00 & 25,900.00 \\ FC Allocated & 4,700.00 & 6,000.00 & 7,100.00 & 17,800.00 \\ Operating Income & 5,900.00 & (1,800.00) & 4,000.00 & 8,100.00 \end{tabular} If BB is eliminted: Contribution Margin lost 25% of FC saved Income from Operations Change in Operating Income