PROBLEM #5 objective of is to reinforce your understanding efthe segmented income statement and how used to determine if a produce ne should be dropped can be Background Goodwood Collections Product Lines Goodwood Collections 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 is kitchen cabinets. These cabinets compete directly with Goodwood Collections kitchen cabinet product line. Pat is feeling this competitive pressure and has been forced to lower prices on all kitchen cabinets sold in Goodwood Collections retail store. In addition, because the kitchen cabinet product line requires some custom design, fitting, and parts for installation, has higher costs than the office furniture and home furniture product 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 sales and cost information for each of the three product lines Sales by product line: Office furniture sales dollars $360,000 Home furniture sales dollars 720,000 Kitchen cabinet sales dollars 120,000 Office Furniture variable expenses Percentage of sales dollars Cost of goods sold 54% Commissions 2%a Freight out Supplies 5% Home Furniture variable expenses Percentage of sales dollars 55% Cost of goods sold 2% Commissions Freight out 5%. Supplies Kitchen Cabinets variable expenses Percentage of sales dollars 69%% Cost of goods sold 4% Commissions 2% Freight out 3% Supplies Fixed advertising expenses directly traceable to each product line 3,200 Office furniture 8,000 Home furniture 20,800 Kitchen cabinet