Accounting Principles II

Short-Run Decsion Making: Relevant Costing

Keep or Drop

Segmented Income Statement

AudioMart is a retailer of radios, stereos, and televisions. The store carries two portable sound systems that have radios, tape players, and speakers. System A, of slightly higher quality than System B, costs $19 more. With rare exceptions, the store also sells a headset when a system is sold. The headset can be used with either system, Variable-costing income statements for the three products follow: $ 44.500 $ 32,500 $8,300 Sales Less Variable expenses 19,700 2 200 3,300 Contribution margin$24,800 $7.300 $5,000 Less Fixed costs 9 500 17.600 2.600 Operating income (loss) $15,300 S(10.300) $2,400 The owner of the store is concerned about the profit performance of System B and is considering dropping it. If the product is dropped, sales of System A will increase by 32%, and sales of headsets will drop by 26%. Round all answers to the nearest whole number. Required