Keep-Or-Drop Decision, Alternatives, Relevant Costs Reshler Company makes three types of rug shampooers. Model 1 is...

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Keep-Or-Drop Decision, Alternatives, Relevant Costs Reshler Company makes three types of rug shampooers. Model 1 is the basic model risted through hardware stores and supermarkets. Model 2 is a more advanced model with both dry and web-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to botels and convention centers. A segmented income statement is shown below Model 1 Model 2 Model 31 Total Sales $235,000 $578,000 $605.500 $1,418,500 Less variable costs of goods sold (93,000) (101,000) (342,400) (590,400) Les commissions Contribution margin (4,900) $137,100 (37,500) (22,000) (64,400) $379,500 $241,100 $757,700 Fixed factory overbead (420,000) (311,000) $25,700 Less common fixed expenses: Fixed selling and administrative 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 foxed 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 11 Model 2 Model 3 Engineering $80,000 Engineering hours Setting up 176,000 Setup hours 210 12,200 70 Customer service 113,000 Service calls 14.100 13,500 1,440 220 29,220 19,220 Keep-Or-Drop Decision, Alternatives, Relevant Costs Reshler Company makes three types of rug shampooers. Model 1 is the basic model risted through hardware stores and supermarkets. Model 2 is a more advanced model with both dry and web-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to botels and convention centers. A segmented income statement is shown below Model 1 Model 2 Model 31 Total Sales $235,000 $578,000 $605.500 $1,418,500 Less variable costs of goods sold (93,000) (101,000) (342,400) (590,400) Les commissions Contribution margin (4,900) $137,100 (37,500) (22,000) (64,400) $379,500 $241,100 $757,700 Fixed factory overbead (420,000) (311,000) $25,700 Less common fixed expenses: Fixed selling and administrative 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 foxed 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 11 Model 2 Model 3 Engineering $80,000 Engineering hours Setting up 176,000 Setup hours 210 12,200 70 Customer service 113,000 Service calls 14.100 13,500 1,440 220 29,220 19,220