Check my work 3 Severo SA of Sao Paulo, Brazil, is organized into two divisions. The company's contributin format segmented income statement in terms of the Brazilian currency, the real R) for last month is given below Division oped Total Company Cloth R4,070,000 R 3,200,000 1.4,000 1,660,000 Leather R 1.870,000 900.000 2.101.000 1.140,000 961.000 Soow Sales Variable expenses Contribution margin Traceable Pixed expenses Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional serent margin 400,000 790.000 54,000 249.000 310,000 190.000 250.000 124.000 125,00 1,629,000 335.000 704,000 472.000 105,000 167.000 100,000 Common fixed expenses Operating income Top management can't understand why the Leather Division has such a low segment margin when its sales are only is less than Top management can't understand why the Leather Division has such a low segment margin when its sales are only 15% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division Leather Division Product the Garments Shoes Handbags Sales R500,000 R770,000 R600,000 Traceable fixed expenses Advertising R90,000 R122.000 R178,000 Selling and administrative R 40,000 R. 45,000 R 62,200 Depreciation R 29,000 R 29,000 Variable expenses as a percentage of sales 60% 30x 633 R 66.000 Required: 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines Leather Division Product Line Shoes Garments Handbags R R R 0 0 0 Traceable fixed expenses 0 0 Total traceable fored expenses 0 OR OR 0 OR Common fored expenses R 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 R8,000 250,000 Traceable fixed expenses: Advertising R 50,000 R123,000 Variable expenses as percentage of sales 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 Sales Market Domestic Handbags Foreign R R R 0 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 Sales Market Domestic Handbags Fornige R IR R 0 0 0 Traceable fixed expenses CE OR OR 0 Common fixed expenses 0 Total common fixed expenses 0 R 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 R210,000 or sales of the shoes product line by R155,000 The campaign would cost R40,000 o. Compute the increased operating income for these product lines for the expected increased sales. Shoes Garments Increased operating income Ri b. Based on the above results, which product line should be chosen? Garments Shoes