QUESTION 4:

Kanuti Company Ltd Manufacture three types of Cars-AeroCar, Boafo and Nanteyie. Data on Sales and Expenses for the past year are given below:

Details	Total N$	AeroCar	Boafo	Nanteyie
Sales	1000	140	500	360
Less Variable Expenses	410	60	200	150
Contribution	590	80	300	210
Less Fixed Cost
Advertising- tractability	216	41	110	65
Depreciation special equipment	95	20	40	35
Salaries-Line Managers	19	6	7	6
General factors fixed costs	200	28	100	72
Total fixed Costs	530	95	257	178
Net Operating Income	60	(15)	43	32

Additional Informations

The general factory fixed cost and depreciation were allocated on the bases off sales. The management is concerned about the continuous losses shown by Aerocar division and want a recommendation on whether or not the line should be discontinued. If the AeroCar line is dropped the two line managers would be discharged of their duties

Required:

Determine whether production and sales of should be discontinued