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 $10. The publishing company's most recent monthly income statement is given below. Product Line Travel Handy Company Cookbook Guide Speller 345,000 $116,000 $164,000 65,000 Sales Expenses: Printing costs 116,000 41.000 64,400 10.600 36,000 Advertising 16.000 16,500 3,500 3.900 General sales 20,700 6,960 9,840 4.600 31,000 Salaries 16.000 10,400 9.900 Equipment depreciation 3,300 3,300 3,300 Sales commissions 34,500 11,600 16.400 6,500 General administration 46,200 15.400 15.400 15.400 Warehouse rent 13,800 4,640 6,560 2,600 7.200 Depreciation-office facilities 2,400 2,400 2,400 Total expenses 315,300 17.300 145.200 52,800 29,700 (1,300) 18,800 12,200 Net operating income (loss) The following additional information is available about the company 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 n the state ment above. Sales commissions are 10% of sales for any product. b. The same equipment is used to produce all three books, so the equipment depreciation cost has been allocated equally among the three product lines. An analysis of the company's activities indicates that the equipment is used 35% of the time to produce cookbooks, 55% of the time to produce travel guides, and 10% 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 he basis of sales dollars. The warehouse rental cost is $3 per square foot per year. The product lines on warehouse contains 55,200 square feet of space, of which 10,000 square feet is used by the cookbook ne, 26,800 square feet by the travel guide line, and 18,400 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 This cost has been allocated to the product lines on the basis of traceable to any specific product line. 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 produc the amounts shown on the statement above. nes The management of Diversified Products, Inc., is anxious to improve the publishing companys 5% return on sales