Playtime Electronics produces two kinds of electronic toys, Wizards and Gizmos. During the current period, 8,000 Wizards and 16,000 Gizmos were produced and sold, generating revenues of $500,000 and $2,000,000, respectively. Unit production costs for the two toys are $50 for Wizards and $70 for Gizmos. In calculating the cost of goods sold, Playtime uses activity-based costing to allocate its overhead costs. However, upstream costs of $240,000 are allocated equally to the two products.

Required:

1) Compute the total net profit for each product and for the firm as a whole.

2) Would you advise eliminating either toy? Why or why not?