Problem 5 - Dropping a product line (24 points) : Top managers of MadeUP Company are alarmed by their operating losses. They are considering dropping the red product line. Company accountants have prepared the following analysis to help make this decision: MadeUp Company Income Statement For the Year Ended December 31, 2103 Total Blue Line $ 432,000 $ 305,000 246,000 150,000 186,000 155,000 Red Line $ 127,000 96,000 31,000 Sales revenue Variable expenses Contribution margin Fixed expenses: Manufacturing Marketing and administrative Total fixed expenses Operating income (loss); 128,000 67,000 195,000 (9,000) 71,000 52,000 123,000 32,000 57,000 15,000 72,000 (41,000) Fixed manufacturing costs will not change if the company stops selling the Red Product Line, however they will save 25% of the fixed marketing and administrative expenses of the Red Product Line. Prepare an analysis to show the financial advantage (disadvantage) of dropping the Red Line. Would you drop the Red Line? Explain