The ABC department store has three major product lines: hardware, clothing, and sporting goods.The store is considering dropping the clothing line because the income statement shows that it is operating at a loss. Note the income statement for these product lines below:

Hardware

Clothing

Sporting Goods

Total

Sales

$10,000

$15,000

$25,000

$50,000

Less: Variable costs

$6,000

$8,000

$12,000

$26,000

Contribution Margin

$4,000

$7,000

$13,000

$24,000

Less: Fixed costs

Direct

$2,000

$6,500

$4,000

12,500

Allocated

$1,000

$1,500

$2,500

$5,000

Total fixed costs

$3,000

$8,000

$6,500

$17,500

Net Income

$1,000

($1,000)

$6,500

$6,500

Should the store drop the clothing line of business?Explain using the sales and cost data above.