Hackerott Camera is considering eliminating Model AE1 from its camera line because of losses over the past quarter. The past three months of information for model AE1 is summarized below:
| Sales (1,000 units) |
$250,000 |
| Manufacturing costs: |
|
| Direct materials |
140,000 |
| Direct labor ($15 per hour) |
30,000 |
| Support |
100,000 |
| Operating loss |
($20,000) |
Support costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE1 that has no resale value.
Should Hackerott Camera eliminate Model AE1 from its product line? Why or why not?