PROBLEM #5 Objective The objective of Problem 5 is to reinforce your understanding of the segmented income statement and how it can be used to determine if product line should be dropped. 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 intemational 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, it 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 $330,000 Home furniture sales dollars 660,000 Kitchen cabinet sales dollars 0,000 Office Furniture variable expenses Percentage ofsales dollars Cost of goods sold 55% Commissions Freight out Supplies 5% Home Furniture variable expenses -Percentage of sales dollars Cost of goods sold 56% Commissions 2%, Freight ou Supplies Kitchen Cabinets variable expenses Percentage of sales dollars Cost of goods sold 70% Commissions 4% Freight out 2% Supplies ed advertising expenses directly traceable to each product l Office furniture 3,000 Home furniture 7,500 Kitchen cabinet 9,500