help me solve 2&3

Keep-Or-Drop Decision, Alternatives, Relevant Costs Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below. Model 1 Model 2 Model 3 Total Sales $225,000 (99,000) Less variable costs of goods sold $578,000 (162,760) (36,500) $618,500 (349,200) (21,000) $1,421,500 (610,960) (63,100) $747,440 Less commissions (5,600) Contribution margin $120,400 $378,740 $248,300 Less common fixed expenses: Fixed factory overhead Fixed selling and administrative (375,000) (287,000) $85,440 Operating income While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered: Driver Usage by Model Activity Activity Cost Activity Driver Model 1 Model 2 Model 3 Engineering $77,000 Engineering hours 710 74 216 following information on activities and drivers was gathered: Driver Usage by Model Activity Activity Cost Activity Driver Model 1 Model 2 Model 3 Engineering $77,000 Engineering hours 710 74 216 Setting up 196,000 Setup hours 13,000 12,000 29,216 Customer service 105,000 Service calls 13,500 1,440 19,216 In addition, Model 1 requires the rental of specialized equipment costing $24,500 per year. Required: 1. Reformulate the segmented income statement using the additional information on activities. Use a minus sign to indicate any negative margins. Do NOT round interim calculations and, if required, round your answer to the nearest dollar. If amount box does not require an entry, leave it blank or enter "O". Reshier Company Segmented Income Statement Model 1 Model 2 Model 3 Total Sales 225,000 578,000 618,500 $ 1,421,500 Less variable cost of goods sold 99,000 162,760 349,200 610,960 Less commissions 5,600 36,500 21,000 63,100 Contribution margin 120,400 378,740 248,300 747,440 Sales 225,000 $ 578,000 $ 618,500 1,421,500 Less variable cost of goods sold 99,000 162,760 349,200 610,960 Less commissions 5,600 36,500 21,000 63,100 Contribution margin 120,400 $ 378,740 248,300 747,440 Less traceable fixed expenses: Engineering 54,670 5,698 16,632 77,000 Setting up 46,997 43,382 105,621 196,000 Equipment rental 24,500 o 0 24,500 Customer service 41,500 4,427 59,073 105,000 Product margin -47,267 325,233 66,974 344,940 Less common fixed expenses: Factory overhead 77,500 Selling and admin. expense 182,000 Operating income 85,440 2. Using your answer to Requirement 1, assume that Reshier Company is considering dropping any model with a negative product margin. What are the alternatives? Keeping Model 1 or dropping it Which alternative is more cost effective and by how much? (Assume that any traceable fixed costs can be avoided.) DO NOT round interim calculations and, if required, round your answer to the nearest dollar. Dropping Model 1 will add $ 47,267 X to operating income 3. What if Reshier Company can only avoid 190 hours of engineering time and 4,900 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 2? Which alternative is more cost effective and by how much? Do NOT round interim calculations and, if required, round your answer to the nearest dollar. Keeping Model 1 will add k2054 X to operating income