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Fruitas InG (Fruitas) Fruitas has the following segment information: Pastry, Fruit Juices & Desserts,...

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Accounting

Fruitas InG (Fruitas)
Fruitas has the following segment information: Pastry, Fruit Juices & Desserts, and Fast Food.
In 2022, the total common fixed expenses amounted to 175,540(in thousands). Data concerning
the company's segmented income statement performance for the year ended December 31,
2022, is as follows:
Fruitas, lnc.
Contribution For mat Segmented In come Statement
For the year ended 31 December, 2022
Required: Assume that the business head of the Fast Food segment has proposed the following:
Proposal no.1 is to run promotions to improve customer recognition. The promotions will run for a year
for a total cost of 35 million. The business head expects sales to increase by 20% during the same
year when the promotion is run but expects to impact sales significantly during the following years from sales from repeat customers.
Proposal no.2 is to source cheaper raw materials to save on food costs. When implemented, the
business head expects variable expenses to decrease by 5%.
Compute the Segment Margin under each Proposal by presenting in a table/ Which one would you
recommend? Discuss.
Note: Segment Margin is Contribution Margin Less Traceable Fixed Expenses.
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