Diversified Products, Inc., has recently acquired a small publishing company that offers three books for sale-a cookbook, a travel guide, and a handy speller. Each book sells for $16. The publishing company's most recent monthly income statement is shown below. Product 1ine Total Handy Speller Travel Guide $162,000 67,000 Cookbook Company $340,000 $111,000 Sales Expenses Printing costs Advertising General sales Salaries 64,300 16,000 9,720 10,300 3,200 16,200 15,300 6,480 2,300 115,000 35,000 20,400 30,000 9,600 34,000 45,900 13,600 40,000 14,800 6,660 15,000 3,200 11,100 15,300 4,440 2,300 10,700 4,200 4,020 4,700 3,200 Equipment depreciation Sales commissions General administration Warehouse rent Depreciation-office facilities Total expenses 6,700 15,300 2,680 2,300 6,900 310,400 53,800 18,200 13,200 112,800 143,800 Net operating income (loss) S 29,600 (1,800) The following additional information is available: a. Only printing costs and sales commissions are variable; all other costs are fixed. The printing costs (which include materials, labor, and variable overhead) are traceable to the three product lines as shown in the income statement above. Sales commissions are 10% of sales b. The same equipment is used to produce all three books, so the equipment depreclation expense has been allocated equally among the three product lines. An analysis of the company's activities indicates that the equipment is used 30 % of the time to produce cookbooks, 55% of the time to produce travel guides, and 15% of the time to produce handy spellers. c. The warehouse is used to store finished units of product, so the rental cost has been allocated to the product lines on the basis of sales dollars. The warehouse rental cost is $3 per square foot per year. The warehouse contains 54,400 square feet of space, of which 9,800 square feet is used by the cookbook line, 26,600 square feet by the travel guide line, and 18,000 square feet by the handy speller line. d. The general sales cost above includes the salary of the sales manager and other sales costs not traceable to any specific product line. This cost has been allocated to the product lines on the basis of sales dollars. e. The general administration cost and depreciation of office facilities both relate to administration of the company as a whole. These costs have been allocated equally to the three product lines. f. All other costs are traceable to the three product lines in the amounts shown on the income statement above. The management of Diversified Products, Inc., is anxlous to improve the publishing company's 4% return on sales. Prepare a new contribution format segmented income statement for the month. Adjust allocations of equipment depreciation and of warehouse rent as indicated by the additional information provided. (Round your intermediate calculations to 2 decimal places.) Total Company Travel Guide Handy Speller Cookbook Variable expenses: Total variable expenses Traceable fixed expenses: Total traceable fixed expenses Common fixed expenses: Total common fixed expenses Compute the contribution margin ratio for each product. (Round your answers to the nearest whole percent.) Travel Guide Cookbook Handy Speller Contribution margin ratio %
