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 Sales Variable expenses: Variable manufacturing expenses $56,000 Sales commissions 22,000 Shipping 6,000 $200,000 Total variable expenses 84,000 116,000 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 7,000 40,000 13,000 48,000 3,100 25, 4801 Total fixed expenses 136,500 Operating loes $120,580) *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 eifect 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.) Keep School Drop School Knapsack Knapsack Difference: Operating Income Increase or (Decrease) 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 equipment Contribution margin Fixed expenses: Salary of product-line manager General factory overhead Depreciation of equipment Advertising-traceable Insurance on inventories Purchasing department Total fixed expenses Operating loss b. Would you recommend that the Williams Products Incline be discontinued? Yes ONO