Question 2 (10 marks) Clinton 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. The company's direct costs behave as variable costs, while the indirect costs do not vary with changes in sales. Dropping Product B will allow the company to cancel one equipment rental costing $300 per month, while the other existing equipment will be used for additional production of Product A. One supervisor earning $600 per month would also be terminated if Product B is dropped. Clinton's other fixed overhead will continue regardless of the decision made. The current monthly income statement data follows: Sales Revenue Product A $12,000 Product B $8,000 Company-Wide Total $20,000 Direct Costs 3,500 2,200 5,700 Indirect Costs: Indirect labour 1,000 1,200 2,200 Equipment rental 300 2,600 2,900 Other fixed overhead 1,000 2,100 3,100 Operating income/(loss) $6,200 ($100) $6,100 Required: Determine the effect on Clinton's company-wide monthly operating income (in total dollars) if Product B is dropped. Should Clinton Company drop Product B? 1