Problem 2 Friendly Company produces a 3 products, Product A, Product B, and Product C. Below is financial information about each: Assume that: - Direct material and direct labor costs are variable cost components, - Fixed factory overhead includes indirect costs specific to the product and an assignment of plant facilities cost, which is assigned equally to each product. For the period covered above, a total of $30,000 of plant facilities cost is assigned, i.e., $10,000 to each product, and - Fixed selling and administrative expenses are not specific to the product. They are assigned based on a product's direct labor cost as a % of total direct labor cost. Required: (For all analysis, ignore income taxes, as applicable) a. Based on its high fixed costs, management is considering discontinuing Product A. Do you agree? Please explain your answer. b. Using the information above, complete the following table: c. Using each product's operating leverage, determine the product's expected profit amount given a 25% increase in sales. d. Prepare a revised contribution margin Income Statement based on the expected sales. Assume the sales increase is from increase unit sales, not selling price. (Round all amounts to nearest \$s) e. Giving your analysis for this question, reconsider your answer to part a., i.e., should management discontinue Product A? Please support your answer with metrics. Problem 2 Friendly Company produces a 3 products, Product A, Product B, and Product C. Below is financial information about each: Assume that: - Direct material and direct labor costs are variable cost components, - Fixed factory overhead includes indirect costs specific to the product and an assignment of plant facilities cost, which is assigned equally to each product. For the period covered above, a total of $30,000 of plant facilities cost is assigned, i.e., $10,000 to each product, and - Fixed selling and administrative expenses are not specific to the product. They are assigned based on a product's direct labor cost as a % of total direct labor cost. Required: (For all analysis, ignore income taxes, as applicable) a. Based on its high fixed costs, management is considering discontinuing Product A. Do you agree? Please explain your answer. b. Using the information above, complete the following table: c. Using each product's operating leverage, determine the product's expected profit amount given a 25% increase in sales. d. Prepare a revised contribution margin Income Statement based on the expected sales. Assume the sales increase is from increase unit sales, not selling price. (Round all amounts to nearest \$s) e. Giving your analysis for this question, reconsider your answer to part a., i.e., should management discontinue Product A? Please support your answer with metrics