Delta Aluminums management is considering eliminating product B, which has been showing a loss. The companys annual income statement, in $000, is as follows:
					A		B		C		Total
	Sales				$2,200		$1,400		$1,800		$5,400
	Variable costs				1,400		800		1,080		3,280
	Contribution margin				$800		$600		$720		$2,120
	Advertising*				$630		$525		$520		$1,675
	Depreciation**				15		10		20		45
	Corporate expenses***				90		80		105		275
	Total fixed costs				$735		$615		$645		$1,995
	Operating income				$65		($15)		$75		$125
	* specific to each product
	** specific to each product; no other use available, no resale value
	*** allocated based on number of employees
Directions:
a.	Restate the income statement in segment margin format.
		Here's one way you could solve this problem:
					A		B		C		Total
	Sales				[Figure]		[Figure]		[Figure]		[Formula]
	Variable costs				[Figure]		[Figure]		[Figure]		[Formula]
	Contribution margin				[Figure]		[Figure]		[Figure]		[Formula]
	Less direct fixed costs
	Advertising				[Figure]		[Figure]		[Figure]		[Formula]
	Depreciation				[Figure]		[Figure]		[Figure]		[Formula]
	Segment margin				[Formula]		[Formula]		[Formula]		[Formula]
	Less common fixed costs										[Figure]
	Operating profit										[Formula]
	Or solve your own way:
b.	What would be the effect on income if product B were dropped?
	Answer:
c.	Management is considering making a new product using product Bs equipment. If the new products selling price per unit were $10, its variable costs were $4, and its advertising were the same as for product B, how many units of the new product would the company have to sell to make the switch from product B to the new product worthwhile?