Tracey Douglas is the owner and managing director of Heritage Garden Furniture Ltd., a South African company that makes museum-quality reproductions of antique outdoor furniture. Tracey would like advice concerning the advisability of eliminating the model C3 lawn chair These lawn chairs have been among the company's best-selling products, but they seem unprofitable. A condensed statement of operating income for the company and for the model C3 lawn chair for the quarter ended June 30 follows: Model C3 Lawn Chair All Products Sales R 500,000 R 3,500,000 Cost of sales Direct materials 200,000 910,000 Direct labour 120,000 805,000 Fringe benefits (20% of direct labour) 24,000 161,000 Variable manufacturing overhead 6,000 35.000 Building rent and maintenance 6,500 35,000 Depreciation 32,000 87,500 Total cost of sales 388,500 2,033,500 Gross margin 111.500 1,466,500 Selling and administrative expenses: 87,500 Product managers' salaries 16,500 Sales commissions (5% of sales) 25,000 175,000 Fringe benefits (20% of salaries and commissions) 8.300 52.500 Shipping 12,000 140,000 560,000 General administrative expenses 80,000 Total selling and administrative expenses 141,800 1,015,000 R (30.300) R 451,500 Net operating income (loss) *The currency in South Africa is the rand, denoted here by R