Swanton Company currently sells 3 products and details of revenues and costs are given below. The company is thinking of discontinuing the production 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%
Desk
Calendars Pen sets Paper-clip
Holders
Sales $280,000 $240,000 $33,000
Variable costs 160,000 160,000 38,000
Direct fixed costs 40,000 20,000 10,000
Indirect fixed costs 30,000 40,000 16,000
1. Should the paper clip holders division be discontinued?
2.What is the net benefit or net loss of dropping the production and sale of paper clip holders?