Oriole 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		$2,260,000		$1,407,000		$1,806,500		$5,473,500
Variable expenses		1,676,000		600,700		1,081,800		3,358,500
Contribution margin		$584,000		$806,300		$724,700		$2,115,000
Advertising expense		$518,000		$425,000		$521,000		$1,464,000
Depreciation expense		15,300		10,800		20,200		46,300
Corporate expenses		94,000		84,900		106,200		285,100
Total fixed expenses		$627,300		$520,700		$647,400		$1,795,400
Operating income		$(43,300)		$285,600		$77,300		$319,600

Advertising expense Depreciation expense Corporate expenses

(a)

Restate the income statement in segment margin format.

		A		B		C		Total
select an income statement item		$		$		$t		$
select an income statement item		$		$		$		$
select an income statement item		$		$		$		$
select between addition and deduction		$		$		$		$
select an income statement item		$		$		$		$
select an income statement item		$		$		$		$
select an income statement item		$		$		$		$
select between addition and deduction		$		$		$		$
select an income statement item		$		$		$		$

(b)

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

Net income would by $

(c)

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?

Units