Keep Or Drop Deasion, 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 21 Model 31 Total Sales $225,000 $586,000 $612,500 $1,423,500 Less variable costs of goods sold Less commissions Contribution margin (98,500) (4,600) $121,900 (155,720) (30,500) $399,760 (331,200) (585,420) (20,500) (55,600) $260,800 $782,480 Less common foved expenses: Fixed factory overhead Fixed selling and administrative Operating income (410,000) (291,000) $81,480 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 Engineering Activity Cost Activity Driver Model 1 Model 2 Model 3 $78,000 Engineering hours. 740 78 182 Setting up 200,000 Setup hours Customer service 118,000 Service calls 12.100 14,200 13,300 1,460 29,182 19,182