Solve 26-2

Problem 26-2. Vulcan Swimsuit Company is considering dropping its line of women's beach robes. A recent product income statement for the robe line follows: Revenue Cost of goods sold Gross margin Selling and administrative expenses Net loss $950,760 861,840 88,920 136,800 $ (47,880) Factory overhead accounts for 35 percent of the cost of the goods sold and is one-third fixed. These data are believed to reflect conditions in the immediate future. Required: Should the line be dropped