Problem 4 Rise and Rise is a retailer of stereos, turntable, mixer, and other as DJ's tools. The store carries two portable sound systems that have turntable, mixed and CDJ. System A of slightly higher quality than System B.costs more. With rare exceptions, the store also sells a headset when a system is sold. The headphones can be used with either system. Vanablecosting income statements for the three products follow System A System Headphone Sales $ 50,000 $ 37,500 $ 10,000 Less: Variable Expenses $ 25000 $ 30,000 $ 4.500 Contribution margin $ 25,000 $ 7,500 $ 5,500 Less: Fixed Costs $ 10,000 $ 18,000 $ 2700 Operating Income $15.000 15 10.500) $22.800 *This includes common fixed costs totaling $18,000, allocated to each product in proportion to its revenues The owner of the store is concemed about the profit performance of System B and is considering dropping it. If the product is dropped sales of System A Willincrease by 30 percent, and sales of headphones will drop by 25 percent Required a Prepare segmented income statements for the three products using a better format b. Prepare segmented income statements for System A and the headphones assuming that System Bis dropped. Should B be dropped? c Suppose that a third system. System with a similar quality to System B. could be acquired. Assume that with the sales of A would remain unchanged, however, C would produce only 80 percent of the revenues of B, and sales of the headphones would drop by 10 percent. The contribution margin ratio of C is 50 percent and its direct fixed costs would be identical to those of B. Should System B be dropped and replaced with System C