Fruitas InG $($Fruitas$)$

Fruitas has the following segment information: Pastry, Fruit Juices & Desserts, and Fast Food.

In $2022,$ the total common fixed expenses amounted to $175,540($in thousands$).$ Data concerning

the company's segmented income statement performance for the year ended December $31,$

$2022,$ is as follows:

Fruitas, lnc$.$

Contribution For mat Segmented In come Statement

For the year ended $31$ December, $2022$

Required: Assume that the business head of the Fast Food segment has proposed the following:

Proposal no$.1$ is to run promotions to improve customer recognition. The promotions will run for a year

for a total cost of $35$ million. The business head expects sales to increase by $20\%$ during the same

year when the promotion is run but expects to impact sales significantly during the following years from sales from repeat customers.

Proposal no$.2$ is to source cheaper raw materials to save on food costs. When implemented, the

business head expects variable expenses to decrease by $5\%.$

Compute the Segment Margin under each Proposal by presenting in a table$/$ Which one would you

recommend? Discuss.

Note: Segment Margin is Contribution Margin Less Traceable Fixed Expenses.