12. A company is considering discontinuing one of its product lines. Given information about the
product line is shown below:
Contribution margin $700,000
Fixed expenses $950,000
Net operating loss (250,000)
If this product line is dropped, 65% of the fixed expenses can be eliminated. Should the product line
be retained or dropped? What is the financial advantage (or disadvantage) of discontinuing the
product line? Show your calculations.