Scarce resource; discontinued product lines; negative contribution margin The officers of Bardwell Company are reviewing the profitability of the companys four products and the potential effects of several proposals for varying the product mix. The following is an excerpt from the income statement and other data.

	Total	Product P	Product Q	Product R	Product S
Sales	$125,200	$20,000	$36,000	$25,200	$44,000
Cost of goods sold	(88,548)	(9,500)	(14,112)	(27,936)	(37,000)
Gross profit	$36,652	$10,500	$21,888	$(2,736)	$7,000
Operating expenses	(24,008)	(3,980)	(5,936)	(5,652)	(8,440)
Income before taxes	12,644	$6,520	$15,952	$(8,388)	$(1,440)
Units sold		2,000	2,400	3,600	4,000
Sales price per unit		$10.00	$15.00	$7.00	$11.00
Variable cost of goods sold		2.50	3.00	6.50	6.00
Variable operating expenses		1.17	1.25	1.00	1.20

Each of the following proposals is to be considered independently of the other proposals. Consider only the product changes stated in each proposal; the activity of the other proposals remains stable. a. What is the effect on income if Product P is discontinued? Note: Do not use a negative sign with your answer. Dropping the segment would result in an Answerincremental gain ofIncremental loss of $Answer b. What is the effect on income if Product R is discontinued? Note: Do not use a negative sign with your answer. Dropping the segment would result in an Answerincremental gain ofIncremental loss of $Answer c. What is the effect on income if Product R is discontinued and a consequent loss of customers causes a decrease in sales of 400 units of Product Q? Note: Do not use a negative sign with your answer. Dropping the segment would result in an Answerincremental gain ofIncremental loss of $Answer d. What is the effect on income if the sales price of product R is increased to $8.00 with a decrease in the number of units sold to 3,000? Note: Do not use a negative sign with your answer. Dropping the segment would result in an Answerincremental gain ofIncremental loss of $Answer e. Janet Poole, marketing manager at Bardwell Company, approaches Pamela Bardwell, the companys president. She proposes that Bardwell Company drop production of Product S to produce Product T, which is made on the same production equipment. Product T has a selling price of $14.00, variable manufacturing costs of $9.00, and variable selling expenses of $2.46. Poole estimates that 4,200 units of Product T could be sold annually; she feels that this would be good for the company, as total sales revenue will increase by $14,800 and Product T would be replacing a product that is currently losing money for the company. Poole also believes that this would be good for the morale of the sales department, as total sales commissions will increase. What is the effect on income if the company drops Product S and produces Product T instead? Note: Do not use a negative sign with your answer. Dropping the segment would result in an Answer