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Question 2 (8 Marks) When Mr. Happy Golightly, president and chief executive of Miles Inc., first saw the segmented income statement below, he flew into
Question 2 (8 Marks) When Mr. Happy Golightly, president and chief executive of Miles Inc., first saw the segmented income statement below, he flew into his usual rage: "When will we ever start showing a real profit? I'm starting immediate steps to eliminate those two unprofitable lines!" \begin{tabular}{|c|c|c|c|c|} \hline & \multicolumn{4}{|c|}{ Product Lines } \\ \hline & Total & Umbrellas & Vests & Watches \\ \hline Sales & $250,000 & $100,000 & $75,000 & $75,000 \\ \hline Variable expenses & 119,000 & 37,000 & 35,000 & 47,000 \\ \hline Contribution margin & 131,000 & 63,000 & 40,000 & 28,000 \\ \hline Traceable fixed expenses & 101,500 & 31,000 & 40,500 & 30,000 \\ \hline Common expenses, allocated & 32,900 & 18,000 & 10,500 & 4,400 \\ \hline Operating income (loss) & $3,400 & $14,000 & $11,000 & $6,400 \\ \hline \end{tabular} * These traceable expenses could be eliminated if the product lines to which they are traced were Required: Recommend which segments, if any, should be eliminated. Prepare a report in good form to support your answer. A segmented income report, without the allocation of common fixed expenses, will provide the basis for deciding which segments to drop. Note: 6 marks for the calculations and 2 marks for the conclusion
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