The following annual income statement is for Apex Jewelry, Inc., a maker of fine jewelry:

Product Lines

	Bracelets	Necklaces	Earrings	Total
Sales revenue	$787,500	$1,050,000	$262,500	$2,100,000
Variable costs	367,500	577,500	105,000	1,050,000
Contribution margin	$420,000	$472,500	$157,500	$1,050,000
Direct fixed costs	409,500	336,000	73,500	819,000
Allocated fixed costs	59,063	78,750	19,688	157,501
Profits (loss)	$-48,563	$57,750	$64,312	$157,501

Apex Jewelry is concerned about the losses associated with the bracelets product line and is considering dropping this product line. Allocated fixed costs are assigned to product lines based on sales. For example, $59,063 in allocated fixed costs is allocated to the bracelets product line based on the bracelets product line sales as a percentage of total sales ($59,063 = $157,501 [$787,500 $2,100,000]). If Apex Jewelry eliminates a product line, total allocated fixed costs are assigned to the remaining product lines. All variable costs and direct fixed costs are differential costs.

1. Using the differential analysis determine whether Apex Jewelry would be better off dropping the bracelets product line or keeping the product line. Support your conclusion.