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: $235,000 $65,800 25,850 17,050 WILLIAMS PRODUCTS INC. Income Statement-School Knapsacks For the Quarter Ended June 30 Sales Variable expenses : Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Fixed expenses: Salary of product-line manager General factory overhead Depreciation of equipment (no resale value) Advertising-traceable Insurance on inventories Purchasing department Total fixed expenses Operating loss 98,700 136,300 8,500 46,300+ 16,000 50,100 3,700 28,3607 152,960 $(16,660) *Allocated on the basis of machine-hours. tAllocated 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 company's total general factory overhead or total purchasing department expenses. Daad. 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.) Keep School Knapsack Drop School Knapsack Difference: Operating Income Increase or (Decrease) 0 O 0 0 Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Fixed expenses: Salary of product-line manager General factory overhead Depreciation of equipment Advertisingtraceable Insurance on inventories Purchasing department Total fixed expenses Operating loss 0 0 0 $ 0 $ 0 $ 0 b. Would you recommend that the Williams Products Inc line be discontinued? Yes No