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Cullumber Toys' management is considering eliminating product A, which has been showing a loss for several years. The company's annual income statement, is as follows: B C Sales Variable expenses Contribution margin Advertising expense Depreciation expense Corporate expenses Total fixed expenses Operating income $2,244,000 1,684,000 $560,000 $527,000 15,200 92,500 $634,700 $(74,700) $1,407,000 601,000 $806,000 $430,000 10,100 80,200 $520,300 $285,700 $1,813,400 1,099,500 $713,900 $522,000 20,300 105,200 $647,500 $66,400 Total $5,464,400 3,384,500 $2,079,900 $1,479,000 45,600 277,900 $1,802,500 $277,400 Advertising expense - Specific to each product. Depreciation expense - Specific to each product; no other use available, no resale value. Corporate expenses - Allocated based on number of employees. Restate the income statement in segment margin format. A B Sales Revenue 2244000 $ 1407000 $ Variable expenses 1684000 601000 Contribution margin 560000 806000 Less : Direct fixed expenses Advertising 527000 i 430000 i Depreciation 15200 10100 Segment margin $ 17800 $ 365900 $ Less V: Common fixed expenses Operating profit (b) Your Answer Correct Answer (Used) Your answer is partially correct. What would be the effect on income if product A were dropped? Net income would decrease v by s 40000 e Textbook and Media Solution Attempts: 3 of 3 used (c) Management is considering making a new product using product A's equipment. If the new product's selling price per unit were $10, its variable costs were $5, and its advertising costs were the same as for product A, how many units of the new product would the company have to sell to make the switch from product A to the new product worthwhile? Units e Textbook and Media Save for Later Attempts: 0 of 3 used Submit

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