Ch 17 * Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below. Model 1 Model 2 Model 3 Sales $235,000 $590,000 $604,500 Total $1,429,500 Less variable costs of goods sold (93,500) (159,240) (347,200) (599,940) Less commissions (4,500) (28,000) (22,250) (54,750) Contribution margin $137,000 $402,760 $235,050 $774,810 Less common fixed expenses: Fixed factory overhead Fixed selling and administrative (420,000) (283,000) $71,810 Operating income While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered: C Activity Activity Cost Activity Driver Model 1 Driver Usage by Model Model 2 Model 3 Engineering $76,000 Engineering hours 800 72 Setting up 191.000 Setup hours 12,300 13,200 126 29,128 Customer service 105,000 Service calls 13.300 1.600 19.128 Previous 939 PM Ch 17 Driver Usage by Model Activity Activity Cost Activity Driver Model 1 Model 2 Model 3 Engineering $76,000 Engineering hours 800 72 128 Setting up 191,000 Setup hours 12,300 13,200 29,128 Customer service 105,000 Service calls 13,300 1,600 19,128) * In addition, Model 1 requires the rental of specialized equipment costing $21,000 per year. Required: 1. Reformulate the segmented income statement using the additional information on activities. Use a minus sign to indicate any negative margins. Do NOT round interim calculations and, if required, round your answer to the nearest dollar. If amount box does not require an entry, leave it blank or enter "0". Reshier Company Segmented Income Statement Model 1 Model 2 Model 3 Total Contribution margin Less traceable fixed expenses: Previous Reshier Company Segmented Income Statement Model 1 Model 2 Contribution margin Less traceable fixed expenses: Product margin Less common fixed expenses: Operating income 1000000000 Model 3 Total QOOQ 00Q000 QOOQ 0000Q Operating income 2. Using your answer to Requirement 1, assume that Reshier Company is considering dropping any model with a negative product margin. What are the alternatives? Which alternative is more cost effective and by how much? (Assume that any traceable fixed costs can be avoided.) Do NOT round interim calculations and, if required, round your answer to the nearest dollar. will addi to operating income 3. What if Reshier Company can only avoid 168 hours of engineering time and 5,050 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 2? Which alternative is more cost effective and by how much? Do NOT round interim calculations and, if required, round your answer to the nearest dollar. will add s to operating income Previous 9:40 FR