A summary of the profit and loss reported in each of 3 product lines B, C, and D is as follows: Product B Product C Product D Shs.000 Shs.000 Shs.

Required

Comment on the financial situation as presented in the above summary

Comment on a decision to discontinue product C where

60% of the fixed costs charged to it relate to advertising of product C and are avoidable if discontinued OR

All of the fixed costs charged to product C are avoidable if discontinued

Discuss whether product D should be discontinued if

90% of the fixed costs charged to it are company costs arbitrarily apportioned to it Or

Eliminating of its variable cost would result in an increase in material cost for products B and C because of lost discounts which would have the effect of increasing their variable costs by 5% OR

Products B and D are complementary products whose sales demand is directly related to that of each other