A candy company makes Chocolate and Peanut clusters which produced the followi

A candy company makes Chocolate and Peanut clusters which produced the following results last year.

Chocolate

Peanut

Total

Sales

$500000

$600000

$1100000

Variable costs

420000

350000

$770000

Contribution margin

80000

250000

$330000

Direct fixed costs

50000

15000

$65000

Allocated fixed costs

45000

55000

$100000

Net Income

($15000)

$180000

$165000

A. Should the Chocolate be dropped?

B. Explain your answer for item (a).

C. What would happen to overall net income if the chocolate was dropped?

D. Assume the chocolate clusters are not dropped and the peanut lost 15% of its sales. What would be the effect on net income?