Capital Toys' management is considering eliminating product A, which has been showing a loss for several years. The company's annual income statement, in $000s, is as follows:

a. Specific to each product.
b. Specific to each product; no other use available, no resale value.
c. Allocated based on number of employees.
Required
a. Restate the income statement in segment margin format.
b. What would be the effect on income if product A were dropped?
c. Management is considering making a new product using product A's equipment. If the new product's selling price per unit were $12, its variable costs were $8, 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?

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Total $2,200 1,650 550 $ 500 15 90 $ 605 $1,800 1,080 720 $ 520 20 105 $ 645 $5,400 3,330 $2,070 $1,495 45 275 $1,815 Sales revenue Variable expenses Contribution margin Advertising expense Depreciation expense $1,400 800 $ 800 475 10 80 $ 565 Total fixed expenses Operating income 5 55 $ 235 75255