Pharoah 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: Sales Variable expenses Contribution margin Advertising expense Depreciation expense Corporate expenses Total fixed expenses Operating income A $2,213,000 1,652,000 $561,000 $523,000 16,700 94.300 $634,000 $(73,000) B $1,409,000 601,700 $807,300 $430,000 10,500 84,900 $525,400 $281.900 $1,802,900 1,084,300 $718,600 $520,000 20,300 105,200 $645,500 $73,100 Total $5,424,900 3,338,000 $2,086,900 $1,473,000 47,500 284,400 $1,804,900 $282,000 Advertising expense - Specific to each product. Depreciation expense - Specific to each product; no other use available, no resale value. Corporate expenses - Allocated based on number of employees. (a) Your answer is correct. Restate the income statement in segment margin format B Sales Revenue 2213000 1409000 $ Variable expenses 1652000 i 601700 Contribution margin 561000 807300 Less Direct fixed expenses Advertising 523000 430000 Depreciation 16700 i 10500 Segment margin $ 21300 $ 366800 $ Less Common fixed expenses Restate the income statement in segment margin format A B C Total 2213000 A 1409000 1802900 $ 5424900 1652000 i 601700 i 1084300 i 3338000 561000 807300 718600 2086900 i 523000 430000 520000 i 1473000 16700 10500 20300 47500 i 21300 366800 178300 566400 284400 i 282000 e Textbook and Media Attempts: 1 of 10 used (b) Your answer is correct. What would be the effect on income if product A were dropped? Net income would decrease by $ 38000 (c) Management is considering making a new product using product A's equipment. If the new product's selling price per unit were $10, its variable costs were $5, 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