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Williams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has been experiencing losses on the knapsacks for some time, as shown by the contribution format income statement below:

WILLIAMS PRODUCTS INC.

Income Statement$$School Knapsacks

For the Quarter Ended June $30$

Sales $ $285,000$

Variable expenses:

Variable manufacturing expenses $ $79,800$

Sales commissions $31,350$

Shipping $8,550$

Total variable expenses $119,700$

Contribution margin $165,300$

Fixed expenses:

Salary of product$-$line manager $11,000$

General factory overhead $56,800*$

Depreciation of equipment $($no resale value$)21,500$

Advertising$$traceable $53,600$

Insurance on inventories $4,700$

Purchasing department $33,160$

Total fixed expenses $180,760$

Operating loss $ $(15,460)$

$*$Allocated on the basis of machine$-$hours.

$$Allocated on the basis of sales dollars.

Discontinuing the knapsacks would not affect sales of other product lines and would have no noticeable effect on the company$$s total general factory overhead or total purchasing department expenses.

Required:

a$.$ Compute the increase or decrease of net operating income if the Williams Products Inc line is continued or discontinued. $($Input all amounts as positive except Decreases in Sales, Decreases in Contribution Margin, and Net Losses which should be indicated by a minus sign.$)$ Please make a table with colums keep school knacksack, drop school knacksack $,$difference in operating income.

b$.$ Would you recommend that the Williams Products Inc line be discontinued?

multiple choice

Yes

No

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