Paxton Products has three productlines: A, B, and C.
|
A
|
B
|
C
|
Total
|
|
Sales
|
$ 90,000
|
$ 150,000
|
$ 200,000
|
$ 440,000
|
|
Variable costs
|
50,000
|
130,000
|
100,000
|
280,000
|
|
Contribution margin
|
40,000
|
20,000
|
100,000
|
160,000
|
|
Fixed costs
|
45,000
|
50,000
|
50,000
|
145,000
|
|
Net income
|
$ (5,000)
|
$(20,000)
|
$ 50,000
|
$ 25,000
|
Management is considering dropping product lines A and B.If 50% of the fixed costs for dropped products could be avoided, what recommendation would you make to management? Quantify you answer.