1. Consider the additional information presented as follows, which is hypothetical. All dollar amounts are in thousands; unit amounts are not. Assume that P&G decides to eliminate one shampoo line, Luster, for one of its segments that currently produces three products. As a result, the following are expected to occur.

(1) The number of units sold for the segment is expected to drop by only 125,000 because of the elimination of Luster, since most customers are expected to purchase an Anagen or Catagen product instead. The shift of sales from Luster to Anagen and Catagen is expected to be evenly split. In other words, the sales of Anagen and Catagen will each increase by 50,000 units.

Product-Line Earnings Statements (Dollar amounts are in thousands)
Annual Costs of Operating Each Product Line	Anagen	Catagen	Luster	Total
Sales in units	450,000	450,000	225,000	1,125,000
Sales in dollars	900,000	900,000	450,000	2,250,000
Unit-level costs:
Cost of production	85,500	85,500	46,200	217,200
Sales commissions	11,700	11,700	6,000	29,400
Shipping and handling	20,250	18,000	9,000	47,250
Miscellaneous	6,750	4,500	2,250	13,500
Total unit-level costs	124,200	119,700	63,450	307,350
Product-level costs:
Supervisors salaries	9,600	7,200	2,400	19,200
Facility-level costs:
Rent	100,000	100,000	50,000	250,000
Utilities	112,500	112,500	56,250	281,250
Depreciation on equipment	400,000	400,000	200,000	1,000,000
Allocated companywide expenses	22,500	22,500	11,250	56,250
Total facility-level costs	635,000	635,000	317,500	1,587,500
Total product cost	768,800	761,900	383,350	1,914,050
Profit on products	$131,200	$138,100	$66,650	$335,950