Mountain Sports Lid. Segmented Income Statement For the Year Ended Dec 31, 2013 Cross Country Accessorie Parts & Notes Ski Packages Mountain Bikes 5 Service TOTAL Sales 611,997 765,757 302.263 120.539 1,800,556 Cost of goods sold % 48% 49% 28% 15% Cost of goods sold 290,699 372,081 84.815 17.864 765,459 Gross Profit 321,298 393,676 217.448 102.675 1,035,037 Operating expenses Advertising 38,798 43,506 11,357 9.339 103,000 Depreciation 6,090 6.090 6.090 6.090 24.358 Property taxes 8,485 8.485 8.485 3.485 83,939 Rent 33,006 33,006 33,006 33,006 132,022 Parts & service expense 35,829 44.831 17,696 98,355 Salaries & commissions 114.534 114.534 114.534 55,000 398,602 Utilities 26.217 26.217 26.217 26.217 104 868 Total Operating Expenses 262,357 276,667 217,384 138,136 895,144 Operating income (loss) 58.341 117.009 54 -35.461 139.953 Interest expense 8 2.500 2,500 2,500 2,500 10,000 Income (Loss) before takes 55.841 114.509 -2.436 -37,961 129,953 Income tax 28.00% 12.368 15,475 6.108 2.436 36,387 Net Income (Loss) $43,473 $99,034 -$8,544 -$40,397 $93,566Notes to the financial statements: 1. Advertising is committed to at the beginning of the period by management. Management has many different forms of advertising campaigns with different focuses as follow s: Cross country ski packages Mountain Bikes Ftccessories Parts 3: Service Promotes company as a w hole 3: 32.000 :1: 35,000 $ 8.000 $ 8.000 $ 20.000 3: 103.000 2. The company uses the straight-line method of depreciation. 3. The property taxes are set by the City and do not change with changes in sales volume. 4. Rent has two com-onents: Monthly amount Percentage based on each de-artment's sales 5. Parts and services expense varies with sales of cross country skis, mountain bikes, and accessories. There are no parts 3: service erense for the parts 3: service department. 5. Sales commissions are paid on sales for cross country skis. mountain bikes. and accessories. The Parts 8: Service department employees do not earn sales commissions on their sales. Sales commissions 12% Total yearly salary of employees that sell skis. bikes. and accessories. These employees will continue to work for the company regardless of which product lines are offered. $ 53.000 The store managers are paid a total yearly salary. They are responsible for all of the departments. These managers will continue to work even if any of the divisions are closed. :1: 83.000 The Parts 8: Service Employees only work in that department. If this department were closed, the technicians would be laid off. The total salary for the technicians is $ 55.000 Sales commissions 12% Total yearly salary of employees that sell skis, bikes, and accessories. These employees will continue to work for the company regardless of which product lines are offered. 59,000 The store managers are paid a total yearly salary. They are responsible for all of the departments. These managers will continue to work even if any of the divisions are closed 83,000 The Parts & Service Employees only work in that department. If this department were closed, the technicians would be laid off. The total salary for the technicians is $ 55,000 7. Utilities are the same regardless of activity and will not change even if a product line is dropped. 8. Interest expense is charged on the outstanding bank loans. The total interest expense is $ 10.000 3. Income taxes are calculated for the company as a whole. The company will have to pay taxes regardless of which product lines it offers.Mountain Sports Led. Segmented Income Statement-By Product Line For the Year Ended December 31, 2019 Cross Country Ski Packages Mountain Bikes Accessories Parts and Service TOTAL Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Less: Variable Costs [MUST BE LISTED ALPHABETICALLY) Less: Traceable Fixed Costs [MUST BE LISTED ALPHABETICALLY)Part 2b: Analysis (16 marks] 2. Which product line does the best job of turning sales into profits? (hint: see "SEG" questions in chapter 7 workbook] 3. Management has been trying to decide if any departments should be closed. Based on the segmented income statement you prepared. what are your recommendations to management? Which (if any) 4. Management had been considering closing the Parts & Service Department based on the segmented income statement that the junior accountant prepared. If this segment were closed, management estimates that sales for both Cross Country Skis and Mountain Bikes will decrease (see percentage below). Calculate the overall decrease in income to the company as a whole if the parts & service department is closed. Decrease in cross country 10% skis and mountain bikes Show all amounts as positive numbers: Contribution Margin Lost: Parts & Service Department Cross Country Skis Mountain Bikes Total CM Lost Fixed Costs Avoided Increase [decrease) in income 5. Based on both quantitative and qualitative analysis, should the Parts & Service Department be closed? Explain to management in a way that they can understand. Be sure to use your answer from the previous part in your response. In not nive texthonk answers use question data! 17 markel