Williams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has been experiencing losses on the knapsacks for some time, as shown by the contribution format income statement below:

WILLIAMS PRODUCTS INC.
Income StatementSchool Knapsacks
For the Quarter Ended June 30
Sales				$	295,000
Variable expenses:
Variable manufacturing expenses	$	82,600
Sales commissions		32,450
Shipping		8,850
Total variable expenses					123,900
Contribution margin					171,100
Fixed expenses:
Salary of product-line manager		11,500
General factory overhead		58,900	*
Depreciation of equipment (no resale value)		22,500
Advertisingtraceable		54,300
Insurance on inventories		4,900
Purchasing department		34,120
Total fixed expenses					186,220
Operating loss				$	(15,120	)

*Allocated on the basis of machine-hours. Allocated on the basis of sales dollars.

Discontinuing the knapsacks would not affect sales of other product lines and would have no noticeable effect on the companys total general factory overhead or total purchasing department expenses.

Required: a. Compute the increase or decrease of net operating income if the Williams Products Inc line is continued or discontinued. (Input all amounts as positive except Decreases in Sales, Decreases in Contribution Margin, and Net Losses which should be indicated by a minus sign.)

b. Would you recommend that the Williams Products Inc line be discontinued?

multiple choice

Yes

No