Georgia Co. manufactures and sells two products (A and B). Projected data for next year are: Product A Product B Sales in units 15,000 10,000 Sale price per unit $100 $160 Variable costs manufacturing 50% of sales 60% of sales Sales commissions 20% of sales 20% of sales Advertising $100,000 $120,000 Other fixed costs (Note 1) $240,000 $240,000 Note 1: Each amount of "Other fixed costs* includes $100,000 fixed general overhead allocated by the headquarter of Georgia Co. to each product. The remaining costs are traceable fixed costs to each product. Georgia Co. anticipates no change in the operating result for Product B in the foreseeable future if the product is manufactured. However, Georgia Co. is re-examining all of its products and is trying to decide whether or not to discontinue Product B. REQUIRED: 1. Prepare an income statement in Contribution Margin format showing the segment margin for each product and operating income for Georgia Co. as a whole. 2. Assume that discontinuing the product and sale of Product B will not affect the sale of Product A. If the company drops Product B, what will be the change in annual operating income due to this decision? 3. Assume that discontinuing Product B result in an increase of $200,000 in sales of Product A. There will be no increase in advertising expense. The variable cost structure stays unchanged. 4. Top management of Georgia Co. decided not to drop Product B. Assume that the maximum production capacity of Georgia Co. is limited to 18,000 Hours and the production of one unit of Product A requires 0.50 hours and one unit of Product B requires 1.25 Hours. The market demand is 15,000 units for Product A and 10,000 units for Product B. a.) Is there enough capacity to meet the market demand for each product? b.) Compute the contribution margin per hour for each product? c.) What is the optimal solution do you suggest for Product A and Product B? d.) Present the income statement according to your optimal solution