Swanton Company presently sells three products: desk calendars, pen sets, and paper-clip holders. The company is thinking of discontinuing the production and sales of paper-clip holders. However, because many customers buy the products as a set, Swanton estimates that the sales of the other two products will decrease by 20 percent if the paper-clip holders are discontinued Current data on each of the three products are provided below

\begin{tabular}{lrrrr}

\hline & \begin{tabular}{c}

Desk \\

Calendars

\end{tabular} & Pen Sets & \begin{tabular}{c}

Paper-Clip \\

Holders

\end{tabular} & Total \\

\hline Units $\ldots \ldots \ldots \ldots \ldots \ldots \ldots$ & 40,000 & 20,000 & 12,000 & \\

Sales revenue $\ldots \ldots \ldots \ldots \ldots$ & $\$ 280,000$ & $\$ 240,000$ & $\$ 24,000$ & $\$ 544,000$ \\

Variable costs $\ldots \ldots \ldots \ldots$ & 160,000 & 160,000 & 26,000 & 346,000 \\

Direct fixed costs $\ldots \ldots \ldots \ldots$ & 40,000 & 20,000 & 5,000 & 65,000 \\

Indirect fixed costs. . . . & 30,000 & 40,000 & 6,000 & 76,000 \\

\hline

\end{tabular}

1. What is the segment margin of the paper-clip holders?

2. Interpretive Question: Would you recommend dropping the paper-clip holder product line? Why or why not?