Project $2$: Making a Decision to Keep or Drop a Product LineAquatic Line Company $($ALC$)$ manufactures a variety of strong and durable ropes. The company manufactures all their products in a large factory located near Nephi, Utah. All the types of ropes the company manufactures can be produced using the same machines in the factory. Workers can adjust the machines to produce the specific type of rope needed for production. ALC is reviewing the profitability of its products to understand if changes need to be made to its product portfolio. Product N$3$ is a heavy, durable rope used to secure ships when they dock. The following is the product$-$line contribution margin statement for the most recent year.Revenue$ $1,150,000$Variable Costs Direct Material$ $600,000$ Direct Labor$ $100,000$ Variable Overhead$ $150,000$ Shipping$ $85,000$Contribution Margin$ $215,000$Fixed Costs Rent$ $50,000$ Indirect Labor$ $115,000$ Marketing$ $56,000$Operating Income$ $(6,000)$ For the most recent year, ALC sold $10,000$ yards of N$3.$ The sales price of N$3$ is $$115$ per yard.Management is concerned about the $$6,000$ operating loss for N$3$ and considering dropping the product line altogether and has asked you to analyze the choice to either keep N$3$ in the portfolio or drop the product.If ALC drops N$3,$ ALC will lose all the sales revenue associated with N$3$ but also save on all of the variable costs associated with N$3.$ N$3$ is produced in a factory with other products, so total rent will not decrease even if N$3$ is dropped. Indirect labor includes the salaries and wages of product and factory supervisors. ALC expects $80\%$ of the indirect labor costs associated with N$3$ to be eliminated if N$3$ is dropped because some of the supervisors oversee other products besides N$3$ and so will remain with the company. ALC expects $75\%$ of the marketing costs with N$3$ to be eliminated if N$3$ is dropped.Because dropping N$3$ will result in excess capacity in the factory, ALC has explored ways to utilize that capacity. N$3$ has found an outside textile manufacturing that would be willing to pay $$120,000$ a year to utilize ALCs factory and machines to make their own products if N$3$ is dropped.Finally, ALC has found that the purchase of N$3$ is somewhat correlated with the purchase of another rope product they manufacture, the N$4.$ Therefore, ALC believes that the contribution margin of N$4$ will decrease by $12\%$ from the previous year amount if N$3$ is dropped. N$4$ had a total of $$150,000$ of contribution margin last year. Nothing else about N$4$ would change if N$3$ is dropped.Should ALC drop N$3?$