Ivanhoe Toys' management is considering eliminating product A, which has been showing a loss for several years. The company's annual income statement, is as follows:

		A		B		C		Total
Sales		$2,219,000		$1,408,000		$1,812,800		$5,439,800
Variable expenses		1,655,000		601,500		1,092,600		3,349,100
Contribution margin		$564,000		$806,500		$720,200		$2,090,700
Advertising expense		$505,000		$426,000		$521,000		$1,452,000
Depreciation expense		17,800		10,300		20,200		48,300
Corporate expenses		93,800		81,100		106,800		281,700
Total fixed expenses		$616,600		$517,400		$648,000		$1,782,000
Operating income		$(52,600)		$289,100		$72,200		$308,700

Advertising expense - Specific to each product. Depreciation expense - Specific to each product; no other use available, no resale value. Corporate expenses - Allocated based on number of employees.

(a)

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Your answer is correct.

Restate the income statement in segment margin format.

		A		B		C		Total
select an income statement item AdvertisingCommon fixed expensesContribution marginDepreciationDirect fixed expensesOperating profitSales RevenueSegment marginVariable expenses		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an income statement item AdvertisingCommon fixed expensesContribution marginDepreciationDirect fixed expensesOperating profitSales RevenueSegment marginVariable expenses		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an income statement item AdvertisingCommon fixed expensesContribution marginDepreciationDirect fixed expensesOperating profitSales RevenueSegment marginVariable expenses		enter a total amount for the first part		enter a total amount for the first part		enter a total amount for the first part		enter a total amount for the first part
select between addition and deduction AddLess: select an income statement item AdvertisingCommon fixed expensesContribution marginDepreciationDirect fixed expensesOperating profitSales RevenueSegment marginVariable expenses
select an income statement item AdvertisingCommon fixed expensesContribution marginDepreciationDirect fixed expensesOperating profitSales RevenueSegment marginVariable expenses		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an income statement item AdvertisingCommon fixed expensesContribution marginDepreciationDirect fixed expensesOperating profitSales RevenueSegment marginVariable expenses		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an income statement item AdvertisingCommon fixed expensesContribution marginDepreciationDirect fixed expensesOperating profitSales RevenueSegment marginVariable expenses		$enter a total amount for the second part		$enter a total amount for the second part		$enter a total amount for the second part		enter a total amount for the second part
select between addition and deduction AddLess: select an income statement item AdvertisingCommon fixed expensesContribution marginDepreciationDirect fixed expensesOperating profitSales RevenueSegment marginVariable expenses								enter a dollar amount
select an income statement item AdvertisingCommon fixed expensesContribution marginDepreciationDirect fixed expensesOperating profitSales RevenueSegment marginVariable expenses								$enter a total amount for this statement

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(b)

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Your answer is partially correct.

What would be the effect on income if product A were dropped?

Net income would select an option increasedecrease by $enter a dollar amount .

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Management is considering making a new product using product A's equipment. If the new product's selling price per unit were $11, its variable costs were $6, and its advertising costs were the same as for product A, how many units of the new product would the company have to sell to make the switch from product A to the new product worthwhile?

Please keep in mind Advertising is 505,000 426,000 521,000 1,452,000

Deppreciation is 17,800 10,300 20,200 48,300

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enter a number of units rounded to 0 decimal places