2.Management is surprised by the handbag product line's poor showing and would like to have the product line segmented by market. The following information is available about the markets in which the handbag line is sold:

	Handbag Markets
	Domestic	Foreign
Sales	R	250,000		R	75,000
Traceable fixed expenses:
Advertising	R	45,000		R	50,000
Variable expenses as a percentage of sales		44	%		83	%

All of the handbag product line's selling and administrative expenses and depreciation are common to the markets in which the product is sold. Prepare a contribution format segmented income statement for the handbag product line with segments defined as markets.

3.Refer to the statement prepared in (1) above. The sales manager wants to run a special promotional campaign on one of the product lines over the next month. A marketing study indicates that such a campaign would increase sales of the Garments product line by R205,000 or sales of the shoes product line by R150,000. The campaign would cost R35,000.

a.Compute the increased operating income for these product lines for the expected increased sales.

b.Based on the above results, which product line should be chosen?

multiple choice

• Garments
• Shoes