Required information

$[$The following information applies to the questions displayed below.$]$

Diversified Products, Incorporated, recently acquired a small publishing company offering three books for sale$-$a

cookbook, a travel guide, and a handy speller. Each book sells for $$10.$ The publishing company's most recent monthly

income statement is shown below:

The following additional information is available:

a$.$ Only printing costs and sales commissions are variable; all other costs are fixed. The printing costs $($which include

materials, labor, and variable overhead$)$ are traceable to the three product lines as shown in the income statement

above. Sales commissions are $10\%$ of sales.

b$.$ The same equipment is used to produce all three books, so the equipment depreciation expense has been allocated

equally among the three product lines. An analysis of the company's activities indicates the equipment is used $30\%$ of

the time to produce cookbooks, $50\%$ of the time to produce travel guides, and $20\%$ of the time to produce handy

spellers.

c$.$ The warehouse is used to store finished units of product, so the rental cost has been allocated to the product lines on

the basis of sales dollars. The warehouse rental cost is $$3$ per square foot per year. The warehouse contains $48,000$

square feet of space, of which $7,200$ square feet is used by the cookbook line, $24,000$ square feet by the travel guide

line, and $16,800$ square feet by the handy speller line.

d$.$ The general sales cost above includes the salary of the sales manager and other sales costs not traceable to any

specific product line. This cost has been allocated to the product lines on the basis of sales dollars.

e$.$ The general administration cost and depreciation of office facilities both relate to administration of the company as a

whole. These costs have been allocated equally to the three product lines.

f$.$ All other costs are traceable to the three product lines in the amounts shown on the income statement above.

The management of Diversified Products, Incorporated, is anxious to improve the publishing company's $5\%$ return on

sales.

Required:

$1.$Prepare a new contribution format segmented income statement for the month. Adjust allocations of equipment depreciation and of

warehouse rent as indicated by the additional information provided.