The administrator of ABC Hospital, Mr. Stevens, has just received the latest financial report, and the news is not good. The hospital has been losing money for over a year, and if things don't improve, it may lose its AA bond rating. Stevens has met with his VP of finance, Mr. Sanger, and has asked him to identify areas for cutting costs, beginning with services that are operating at a loss. The following information is for services provided by ABC Hospital's ambulatory care clinic:

• Annual volume in patient visits: 7,000
• Charge per visit: $155
• Variable cost per visit: $45
• Avoidable Fixed costs: $300,000

1. Calculate the impact on the product margin if ABC drops the ambulatory care clinic.
2. What should Mr. Sanger recommend to Mr Stevens regarding the dropping the clinic? You will enter DROP or KEEP as your answer.