Acct 325 HW 5

Waterway, Inc., a producer of shower products, is evaluating the profitability of its men’s, women’s, and children’s product lines. According to the information below, the men’s category is unprofitable.
Men’s Shower Products:
Sales $142,500
Variable costs 98,000
Contribution margin 44,500
Fixed costs 60,500
Operating income (loss) $(16,000)
Waterway has been having difficulty tapping into the men’s market for shower products but strategically would like to have a very broad product offering. If it drops the men’s product line, though, it could free up $28,000 in fixed costs. Having a bit more flexibility in its use of resources could be helpful in improving Waterway’s other offerings.
Would Waterway be financially better or worse off if it dropped the men’s shower products? By how much?
Waterway would be select an option better offworse off by $enter a dollar amount