Segmented Income Statement, Management Decision MakingFunTime Company produces three lines of greeting cards: scented, musical, and regular. Segmented income statements for the past year are as follows: ScentedMusicalRegularTotalSales$ $10,000$$$15,000$$$25,000$$$50,000$Less: Variable expenses$7,00012,00012,50031,500$Contribution margin$ $3,000$$ $3,000$$$12,500$$$18,500$Less: Direct fixed expenses$4,0005,0003,00012,000$Segment margin$ $(1,000)$$ $(2,000)$$ $9,500$$ $6,500$Less: Common fixed expenses $7,500$Operating income $($loss$)$ $$(1,000)$Kathy Bunker, president of FunTime, is concerned about the financial performance of her firm and is seriously considering dropping both the scented and musical product lines. However, before making a final decision, she consults Jim Dorn, FunTimes vice president of marketing.Required:Question Content Area$1.$ Jim believes that by increasing advertising by $$1,000($$$250$ for the scented line and $$750$ for the musical line$),$ sales of those two lines would increase by $30\%.$ Prepare segmented income statements based on Jim's assumptions. Note: Enter all amounts as positive numbers except subtotals, if applicable.FunTimeSegmented Income StatementblankScentedMusicalRegularTotalblankSales$fill in the blank c$6$b$03$f$017$f$8$d$040\_1$$fill in the blank c$6$b$03$f$017$f$8$d$040\_2$$fill in the blank c$6$b$03$f$017$f$8$d$040\_3$$fill in the blank c$6$b$03$f$017$f$8$d$040\_4$blankLess: Variable expensesfill in the blank c$6$b$03$f$017$f$8$d$040\_5$fill in the blank c$6$b$03$f$017$f$8$d$040\_6$fill in the blank c$6$b$03$f$017$f$8$d$040\_7$fill in the blank c$6$b$03$f$017$f$8$d$040\_8$blankContribution margin$fill in the blank c$6$b$03$f$017$f$8$d$040\_9$$fill in the blank c$6$b$03$f$017$f$8$d$040\_10$$fill in the blank c$6$b$03$f$017$f$8$d$040\_11$$fill in the blank c$6$b$03$f$017$f$8$d$040\_12$blankLess: Direct fixed expensesfill in the blank c$6$b$03$f$017$f$8$d$040\_13$fill in the blank c$6$b$03$f$017$f$8$d$040\_14$fill in the blank c$6$b$03$f$017$f$8$d$040\_15$fill in the blank c$6$b$03$f$017$f$8$d$040\_16$blankSegment margin$fill in the blank c$6$b$03$f$017$f$8$d$040\_17$$fill in the blank c$6$b$03$f$017$f$8$d$040\_18$$fill in the blank c$6$b$03$f$017$f$8$d$040\_19$$fill in the blank c$6$b$03$f$017$f$8$d$040\_20$blankLess: Common fixed expensesblankblankblankfill in the blank c$6$b$03$f$017$f$8$d$040\_21$blankOperating income $($loss$)$blankblankblank$fill in the blank c$6$b$03$f$017$f$8$d$040\_22$blankQuestion Content AreaIf you were Kathy, how would you react to this information?Kathy should this proposal. The $30\%$ sales increase, coupled with the increased advertising, the loss. Both scented and musical product$-$line profits increase. However, more must be done. If the scented and musical product margins remain negative, the two products may need to be dropped.Question Content Area$2.$ Jim warns Kathy that eliminating the scented and musical lines would lower the sales of the regular line by $20\%.$ Prepare an income statement for Fun Time assuming the Scented and Musical greeting card lines are dropped. Note: Enter all amounts as positive numbers except subtotals, if applicable.FunTimeIncome Statement$($Regular Greeting Cards only$)$Sales$fill in the blank $9$d$0$ba$9$fc$005$a$049\_1$Less: Variable expensesfill in the blank $9$d$0$ba$9$fc$005$a$049\_2$Contribution margin$fill in the blank $9$d$0$ba$9$fc$005$a$049\_3$Less: Fixed expensesfill in the blank $9$d$0$ba$9$fc$005$a$049\_4$Operating income $($loss$)$$fill in the blank $9$d$0$ba$9$fc$005$a$049\_5$Question Content AreaGiven this information, would it be profitable to eliminate the scented and musical lines?While dropping the two lines results in of $fill in the blank eba$14900$a$073$f$98\_2$ it is than the alternative offered in Requirement $1.$ Question Content Area$3.$ Suppose that eliminating either line reduces sales of the regular cards by $10\%.$ Would a combination of increased advertising $($the option described in Requirement $1)$ and eliminating one of the lines be beneficial? Prepare segmented income statements assuming the Musical line is dropped and advertising is increased. Note: Enter all amounts as positive numbers except subtotals, if applicable.FunTimeSegmented Income StatementblankScentedRegularTotalSales$fill in the blank $4$b$77$da$05$f$005$ff$4\_1$$fill in the blank $4$b$77$da$05$f$005$ff$4\_2$$fill in the blank $4$b$77$da$05$f$005$ff$4\_3$Less: Variable expensesfill in the blank $4$b$77$da$05$f$005$ff$4\_4$fill in the blank $4$b$77$da$05$f$005$ff$4\_5$fill in the blank $4$b$77$da$05$f$005$ff$4\_6$Contribution margin$fill in the blank $4$b$77$da$05$f$005$ff$4\_7$$fill in the blank $4$b$77$da$05$f$005$ff$4\_8$$fill in the blank $4$b$77$da$05$f$005$ff$4\_9$Less: Direct fixed expensesfill in the blank $4$b$77$da$05$f$005$ff$4\_10$fill in the blank $4$b$77$da$05$f$005$ff$4\_11$fill in the blank $4$b$77$da$05$f$005$ff$4\_12$Segment margin$fill in the blank $4$b$77$da$05$f$005$ff$4\_13$$fill in the blank $4$b$77$da$05$f$005$ff$4\_14$$fill in the blank $4$b$77$da$05$f$005$ff$4\_15$Less: Common fixed expensesblankblankfill in the blank $4$b$77$da$05$f$005$ff$4\_16$Operating income $($loss$)$blankblank$fill in the blank $4$b$77$da$05$f$005$ff$4\_17$Question Content AreaBased on your calculations above, identify the best combination for the firm.