Sipacore sells computer equipment and home office furniture. Currently the furniture product line takes up approximately 50 percent of the company's retail floor space. The president of Sipacore is trying to decide whether the company should continue offering furniture or concentrate on computer equipment. Below is a product line income statement for the company. If furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of computer equipment can increase by 14 percent without affecting direct fixed costs. Allocated fixed costs are assigned based on relative sales.

Computer Equipment Home Office Furniture Total

Sales $1,400,000 $1,078,000 $2,478,000

Less cost of goods sold 910,000 784,000 1,694,000

Contribution margin 490,000 294,000 784,000

Less direct fixed costs:

Salaries 171,500 171,500 343,000

Other 53,900 53,900 107,800

Less allocated fixed costs:

Rent 14,560 11,420 25,980

Insurance 3,480 2,874 6,354

Cleaning 4,200 3,123 7,323

President's salary 70,130 62,420 132,550

Other6,3404,81511,155

Net income / (loss) $165,890 $(16,052) $149,838

Determine whether Sipacore should discontinue the furniture line and the financial benefit (cost) of dropping it.

Net income without Home Office Furniture is $ ?

The companyshould __________________________ the Home Office Furniture product line?

A) drop

B) be indifferent between dropping or not dropping

C) not drop