Drop a Segment - Part 1 of 2 Condensed monthly operating income data for Senators Inc. for March 2020 is presented below. Total Ottawa Store Montreal Store Sales S 191, 100 5 80,000 S 111, 100 Less variable expenses 109,770 32.000 77,770 Contribution margin 81,330 48,000 33,330 Less traceable fixed expense 60,000 20,000 40,000 Segment margin 21,330 28,000 (6,670) Less common fixed expenses 10,000 4,000 6,000 Operating Income 11,330 24,000 S (12,670) Additional information regarding Senator's operations includes 75% of each store's traceable fixed expenses are avoidable if the store were to be closed Senator Inc. allocates common fixed expenses to each store on the basis of sales dollars. Management estimates that closing the Montreal store would result in a 10% decrease in the Ottawa store sales, while closing the Ottawa store would not affect the Montreal store sales. The operating results for March are representative of all months. (b) Senator Inc. is considering a promotional campaign at the Montreal store that would not affect the Ottawa store. Suppose that increasing monthly promotional expenses at the Montreal store by $ 5,000 will increase the Montreal store sales by 10% Required: (a) A decision by Senator Inc. to close the Montreal store would result in what monthly increase (decrease) in Senator's operatin Net increase (decrease) in operating income if Montreal store is closed (b) By how much would the monthly operating income of Senator's increase (decrease)?Drop a Segment - Part 2 of 2 Merrickville Windows & Doors manufactures Windows, Doors and Solar Panels in a modern plant located in beautiful, historic Merrickville. The following sales and cost information is available relating to the profitability of these three product lines: Notes Windows Doors Solar Panels Sales S 750,000 S 412,000 S 1,000,000 Costs: Direct materials 300,000 181,280 400,000 Direct labour 75,000 49,440 80,000 Material handling 45,000 32,960 60,000 Depreciation 50,000 48,000 72,000 Selling & marketing 75,000 60,000 120,000 General administration 150,000 100.000 200,000 Total costs 695,000 471,680 932,000 Operating income 55.000 S 59.680) S 68.000 The following additional information has been made available to you in the corresponding notes. 2. Material handling costs vary directly with the number of units produced. Depreciation is calculated using the straight-line method C. 50% of the selling and marketing costs consist of corporate marketing costs and are allocated to the product lines based on relative product line sales. The balance of the selling and marketing costs is comprised of variable sales commissions. A General administration costs include product line manager salaries which are: $ 60,000 for Windows' line $ 50,000 for the Doors' line $ 65,000 for the Solar Panels' line The balance is made up of costs that are allocated from head office and are not directly related to the product lines. If the Doors' product line is dropped, then its manager would be transferred to head office where she would replace a $ 40,000 per year accounting clerk. Required: 1. Assuming that the plant space taken up by the Doors' product line would remain idle, should the product line be dropped? Net advantage (disadvantage) of dropping Doors line Should the Doors product line de dropped (yes or no)2. Assuming that the idle space could be used by the Solar Panels' product line and that its sales would increase by $ 300,000 should the company discontinue the Doors' product line? Net advantage (disadvantage) of dropping Doors line Should the Doors product line be dropped (yes or no)