The management of Schmader Corporation is considering dropping product M12C. Data from the company's accounting system appear below:

Sales	$550,000
Variable expenses	$242,000
Fixed manufacturing expenses	$215,000
Fixed selling and administrative expenses	$132,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $137,000 of the fixed manufacturing expenses and $79,000 of the fixed selling and administrative expenses are avoidable if product M12C is discontinued.

Required:

a. What is the net operating income earned by product M12C according to the company's accounting system? 5 pts

b. Determine the financial advantage (disadvantage) for the company of dropping product M12C. Should the product be dropped? 5 pts