The management of Woznick Corporation has been concerned for some time with the financial performance of its product V860 and has considered discontinuing it on several occasions. Data from the company's accounting system for this product for last year is as follows:

Sales $150,000

Variable expenses $72,000

Fixed manufacturing expenses $50,000

Fixed selling and administrative expenses $33,000

In the company's accounting system, all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $30,000 of the fixed manufacturing expenses and $23,000 of the fixed selling and administrative expenses are avoidable if product V860 was to be discontinued.

1. What is the net operating income earned by product V860 according to the companys accounting system?

2. Should product V860 be dropped or continued? What is the advantage of doing so?