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Swanton company currently sells 3 products and details of

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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%

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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?

Reference no: EM13483646

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