Keep or Drop

AudioMart is a retailer of vintage vinyl records and equipment. The store carries two popular sound systems$$System A and System B$.$ System A$,$ of slightly higher quality than System B$,$ costs $$22$ more. With rare exceptions, the store also sells a specialized headset when a system is sold. The headset can be used with either system. Variable$-$costing income statements for the three products follow:

Line Item Description System A System B Headset

Sales $$45,300$ $$32,500$ $$8,200$

Less: Variable expenses $19,50025,0003,700$

Contribution margin $$25,800$ $$7,500$ $$4,500$

Less: Fixed costs $*9,50017,3002,800$

Operating income $($loss$)$ $$16,300$ $$(9,800)$ $$1,700$

$*$This includes common fixed costs totaling $$17,300,$ allocated to each product in proportion to its revenues.

The owner of the store is concerned about the profit performance of System B and is considering dropping it$.$ If the product is dropped, sales of System A will increase by $28\%,$ and sales of headsets will drop by $25\%.$ Round all answers to the nearest whole number.

Required: Prepare segmented income statements for the three products. Round your answers to the nearest dollar. Input expenses as positive numbers

Prepare segmented income statements for System A$,$ System C and the headsets. Round your answers to the nearest dollar. Input expenses as positive numbers. $($Note: Be sure to complete $3($b$)$ below the statement.$)$AudioMart

Segmented Income Statement

System A$,$ System B$,$ and Headset

$2($a$)$ Conceptual Connection: Prepare segmented income statements for System A and the headsets assuming that System B is dropped. Round your answers to th

nearest dollar. Input expenses as positive numbers. $($Note: Be sure to complete $2($b$)$ below the statement.$)$

AudioMart

Segmented Income Statement

System A and Headset