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# Earl Pearl, accountant for Margie Knall, Inc. has prepared the following product-line income data:

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Mr. Earl Pearl, accountant for Margie Knall, Inc. has prepared the following product-line income data:PRODUCTCSales…………………………………………\$ 100,000……..\$50,000………\$20,000………..\$30,000Variable expenses………………………… 60,000……….30,000…………10,000………….20,000Contribution margin……………………….. .40,000……….20,000…………10,000………….10,000Fixed expenses:Rent…………………………………………. .5,000………..2,500…………..1,000……………1,500Depreciation………………………………. 6,000………..3,000…………..1,200…………….1,800Utilities………………………………………4,000………..2,000……………..500…………….1,5005,000………. 1,500……………..500…………….3,000Maintenance………………………………3,000………..1,500………………600………………900Administrative expenses……………. 10,000………..3,000……………..2,000…………..5,000Total fixed expenses…………………… 33,000……….13,500……………5,800………….13,700Net operating income…………………… \$7,000……….\$6,500………….\$4,200…………(\$3,700)The additional information below is available.The factory rent of \$1,500 assigned to Product C is avoidable if the product is dropped.The company’s total depreciation would not be affected by dropping C.Eliminating Product C will reduce the monthly utility bill from \$1,500 to \$800.All supervisors’ salaries are avoidable.If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from \$3,000 to \$2,000.Elimination of Product C will make it possible to cut two persons from the administrative staff. Currently, their combined salaries total \$2,000.Required: Prepare an analysis showing whether Product C should be eliminated. Articulate your findings.(Points : 15)

Mr. Earl Pearl, Accountant for Margie Knall, Inc. has prepared the following product­line income data: PRODUCTTotal A B CSales…………………………………………\$…

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