PROBLEM 5 Objective objective segmented income statement and how it can be used Problem reinforce your understanding of the determine if a product line should be dropped Background Goodwood Collections Product Lines Goodwood Colleetions sells three different product lines in its retail store Office furniture Home furniture Kitchen cabinets Recently a large international home improvement chain has opened a store in town. One of the products the chain store sells kitchen cabinets. These with Goodwood kitchen cabinet product at is is cabinets compete directly Collections cabinets sold in feeling this competitive pressure and been forced to lower prices some custom Goodwood Collections retail store. In addition, because the kitchen cabinet product line requires product design, fitting, and parts for installation, it has higher costs than the office furniture and home furniture lines. So, Pat believes that Goodwood Collections is losing money on the kitchen cabinet product line Sales and Cost Analysis You help Pat analyze and assemble the following annual sale and cost information for each of the three product Sales by product line S360,000 Office furniture sales dollars 720,000 Home furniture sales dollars 120,000 Kitchen cabinet sales dollars Office Furniture variable expenses Percentage of sales dollars 54% Cost of goods sold 2% Commissions 1%o Freight out 1.5% Supplies Home Furniture variable expenses Percentage of sales dollars: 55% Cost of goods sold 2% Commissions 1% Freight out 1.5% Supplies Kitchen Cabinets variable expenses Percentage of sales dollars 69% Cost of goods sold 4% 2% Commissions 3% Freight out Supplies Fixed advertising expenses directly traceable to each product lin 3,200 8,000 Office furniture 20,800 Home furniture Kitchen cabinet