Garringer Company makes two products, regulars and seasonals. Information on costs associated with each product line is as follows:

Required 1. Develop a segmented income statement, by product and in total for Garringer Company. Be sure to show the segment margin for each product. 2. By how much would operating income increase or decrease if the seasonals were dropped?

12-5 Keep-or-Drop Decision LO3 Garringer Company makes two products, regulars and seasonals. Information on costs associated with each product line is as follows: Regulars Seasonals Sales revenue $135,000 $15,000 Less: Variable expenses 50.000 8.600 Contribution margin $ 85,000 $ 6,400 Less: Direct fixed expenses 3,000 1,200 Common fixed expenses 54.000 6,000 Operating income $ 28,000 $ (800) The direct fixed expenses are advertising and selling costs that are incurred by the particular product line. The common fixed expenses are allocated to the two product lines on the basis of sales revenue. Total common fixed expenses would not change if a product line were dropped. Required 1. Develop a segmented income statement, by product and in total for Garringer Company. Be sure to show the segment margin for each product. 2. By how much would operating income increase or decrease if the seasonals were dropped