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Eggleston Company sells three products. A segmented income statement for the month of May is presented below. Total Company Product A Product B Product C Sales $1,000,000 $500,000 $300,000 $200,000 Variable costs 630,000 300,000 180,000 150,000 Contribution margin 370,000 200,000 120,000 50,000 Traceable fixed costs 280,000 120,000 100,000 60,000 Segment margin 90,000 20,000 $(10,000) Common fixed costs 70,000 Net operating $20,000 income Eggleston's management is considering dropping Product C. Of that product's monthly traceable fixed costs, $8,000 is for equipment depreciation and $5,000 is the product line manager's salary. The remaining traceable fixed costs for Product C are advertising expenses, which can be eliminated if dropping Product C. The manager would not be laid off; she would be reassigned to a supervisory position in the Product B segment. Her salary would not change. The depreciation relates to specialized equipment that has no resale value. If Product C is dropped, management estimates that the contribution margin of Product B will increase by $12,000. However, management would have to lease additional equipment at a monthly rental cost of $5,000 to increase the production levels of Product B to meet the increased demand for that item. How much of the traceable fixed costs of $60,000 for Product C can be avoided if Product C is dropped? $5,000 $8,000 $13,000 $47,000 If Product Cis dropped, what is the impact on the total contribution margin of the company (change in CM)? An increase of $12,000 O A decrease of 50,000 A decrease of 38,000 An increase of 5,000 Question 31 4 pts (bonus) If product C is dropped, what is the impact on Eggleston's net operating income? An increase of 47,000 An increase of 38,000 An increase of 4,000 An increase of 42,000

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