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 Statement-School Knapsacks For the Quarter Ended June 30 $230,000 Sales Variable expenses: Variable manufacturing expenses $64,400 Sales commissions 25,300 6,900 Shipping Total variable expenses 96,600 Contribution margin Fixed expenses Salary of product-line manager General factory overhead Depreciation of equipment (no resale value) Advertising-trace able 133,400 8,250 45,250 15,500 49,750 3,600 Insurance on inventories Purchasing department 27,880 Total fixed expenses 150,230 $ (16,830) Operating loss 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. 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.) Difference: Operating Income Increase or (Decrease) Keep School Knapsack Drop School Knapsack Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses C Contribution margin C 0 Fixed expenses: Salary of product-line manager General factory overhead Depreciation of equipment Advertising-traceable Insurance on inventories Purchasing department Total fixed expenses C C C Operating loss C C C b. Would you recommend that the Williams Products Inc line be discontinued? Yes No 2