Managerial Accounting: E12-10 Dexter Products, Inc., manufactures and sells

Managerial Accounting 
E12-10 Dropping or Retaining a Segment 
Dexter Products, Inc., manufactures and sells a number of items, including an overnight case. The company has been experiencing losses on the overnight case for some time, as shown on the following contribution format income statement: 
Dexter Products, Inc. 
Income Statement—Overnight Cases 
For the Quarter Ended June 30 
  Sales 490,000 
  Variable expenses: 
       Variable manufacturing expenses 129,000 
       Sales commissions 53,000 
       Shipping 15,000 
  Total variable expenses 197,000 
  Contribution margin 293,000 
  Fixed expenses: 
       Salary of product-line manager 28,000 
       General factory overhead* 108,000 
       Depreciation of equipment (no resale value) 38,000 
       Advertising—traceable 129,000 
       Insurance on inventories 10,000 
       Purchasing department † 57,000 
  Total fixed expenses 370,000 
  Net operating loss $(77,000) 
*Allocated on the basis of machine-hours. 
†Allocated on the basis of sales dollars. 

Discontinuing the overnight cases would not affect the company’s sales of its other product lines, its total general factory overhead, or its total purchasing department expenses. 

Required 
a. Compute the increase or decrease of net operating income if the overnight case are continued or discontinued. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive except Decreases in Sales, Decreases in Contribution Margin, and Net Losses which should be indicated by a minus sign. Omit the "$" sign in your response.) 
b. Would you recommend that the company discontinue the manufacture and sale of overnight cases?
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