(Product line) Birnberg Food Service sells quality ice cream and steaks via home delivery. Income statements showing revenues and costs of fiscal year 2006 for each product line follow:

Management is concerned about profitability of steaks and is considering dropping the line. Management estimates that it could rent the equipment currently used to process steaks to a competitor for $17,000 annually. If the steaks line is dropped, allocated corporate costs would decrease from a total of $400,000 to $370,000, and all employees, including the manager of the product line, would be dismissed. The depreciation would be unaffected by the decision, but $210,000 of the delivery costs charged to the steaks line could be eliminated if it is dropped.

a. Recast the preceding income statements in a format that provides more information in making this decision regarding the steaks product line.

b. What is the net advantage or disadvantage (change in total company pre-tax profits) of continuing sales of steaks?
C. Should the company be concerned about losing sales of ice cream prod¬ ucts if it drops the steaks line? Explain,

d. How would layoffs that would occur as a consequence of dropping the steaks line adversely affect the whole company?

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Sales Less: Cost of merchandise sold Commissions to salespeople Delivery costs Depreciation on equipment Salaries of division managers Allocated corporate costs Net income (loss) Ice Cream $ 8,000,000 (4,800,000) (800,000) (1,200,000) (400,000) (160,000) Steaks $ 3,600,000 (2,600,000) (300,000) (240,000) (200,000) (150,000) (200,000) (200,000) $ 440,000 $ (90,000)