Q1: Sandra Company sells two items, product A and product B. The company is considering dropping product B. It is expected that sales of product A will increase by 40% as a result. Dropping product B will allow the company to cancel its monthly equipment rental costing $100 per month. The other existing equipment will be used for additional production of product A. One employee earning $200 per month can be terminated if product B production is dropped. Clinton's other fixed costs are allocated and will continue regardless of the decision made. A condensed, budgeted monthly income statement with both products follows: Product Product B Total Sales $10,000 8,000 $18,000 Direct materials 2,500 2,000 4,500 Direct labr 2,000 1,200 3,200 Equipment renta 300 2,6002,900 Other allocated overhead _1,000 2.100 3,100 Operating income $4,200 S 100 $4,300 Required: Prepare an incremental analysis to determine the financial effect of dropping product B