Problem $3$B Mr$.$ Herman Lester, accountant for Maggie Que Co$.,$ has prepared the following product$-$line income data: Problem $3$B Mr$.$ Herman Lester, accountant for Maggie Que Co$.,$ has prepared the following

product$-$line income data:

The following additional information is available:

The factory rent of $$4,500$ assigned to Product Crash is avoidable if the product were dropped.

$*$The company's total depreciation would not be affected by dropping Crash.

If Product Crash is discontinued, the maintenance department will be able to reduce half of the

monthly expenses.

Elimination of Product Crash will make it possible to cut administrative expenses by $$3,000.$

Required: Prepare an analysis showing whether Product Crash should be eliminated.

Allegient BoF Crash Total

Sales $50,00020,00030,000100,000$

Variable expenses $30,00010,00020,00060,000$

Contribution Margin $20,00010,00010,00040,000$

Fixed Expenses:

Rent $4,0001,5004,50010,000$

Depreciation $3,0001,2001,8006,000$

Maintenance $1,5006001,0003,000$

Administrative Expenses $5,0002,5006,50014,000$

Total fixed expenses $13,5005,80013,80033,000$

Net Operating profit $($loss$)6,5004,200(3,800)7,000$

The following additional information is available:

$*$ The factory rent of $$4,500$ assigned to Product Crash is avoidable if the product were dropped.

$*$ The company's total depreciation would not be affected by dropping Crash.

$*$ If Product Crash is discontinued, the maintenance department will be able to reduce half of the monthly expenses.

$*$ Elimination of Product Crash will make it possible to cut administrative expenses by $$3,000.$

Required: Prepare an analysis showing whether Product Crash should be eliminated.