Severo S A of Sao Paulo, Brazil, is organized into two divisions The company's contribution format segmented income statement ( in terms of the Brazilian currency, the real, R ) for last month is given below Top management can't understand why the Leather Division has such a low segment margin when its sales are only 3 0 less than sales in the Cloth Division As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines The following information is available on the product lines in the Leather Division Analysis shows that R 7 1 , 0 0 0 of the Leather Division's selling and administrative expenses are common to the product lines Required Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines 2 Management is surprised by the handbag product line s poor showing and would like to have the product line segmented by market The following information is available about the markets in which the handbag line is sold Handbag Markets Domestic Foreign Sales R 3 0 0 , 0 0 0 R 1 2 0 , 0 0 0 Traceable fixed expenses Advertising R 5 1 , 0 0 0 R 4 4 , 0 0 0 Variable expenses as a percentage of sales 4 5 8 0 All of the handbag product line s selling and administrative expenses and depreciation are common to the markets in which the product is sold Prepare a contribution format segmented income statement for the handbag product line with segments defined as markets 3 Refer to the statement prepared in ( 1 ) above The sales manager wants to run a special promotional campaign on one of the product lines over the next month A marketing study indicates that such a campaign would increase sales of the Garments product line by R 2 1 1 , 0 0 0 or sales of the shoes product line by R 1 5 6 , 0 0 0 The campaign would cost R 4 1 , 0 0 0 a Compute the increased operating income for these product lines for the expected increased sales b Based on the above results, which product line should be chosen multiple choice Garments Shoes

Question

Severo S   A   of Sao Paulo, Brazil, is organized into two divisions  The company's contribution format segmented income statement ( in terms of the Brazilian currency, the real, R ) for last month is given below  Top management can't understand why the Leather Division has such a low segment margin when its sales are only 3 0   less than sales in the Cloth Division  As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines  The following information is available on the product lines in the Leather Division  Analysis shows that R 7 1 , 0 0 0 of the Leather Division's selling and administrative expenses are common to the product lines  Required  Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines  2   Management is surprised by the handbag product line s poor showing and would like to have the product line segmented by market  The following information is available about the markets in which the handbag line is sold  Handbag Markets Domestic Foreign Sales R 3 0 0 , 0 0 0 R 1 2 0 , 0 0 0 Traceable fixed expenses  Advertising R 5 1 , 0 0 0 R 4 4 , 0 0 0 Variable expenses as a percentage of sales 4 5   8 0   All of the handbag product line s selling and administrative expenses and depreciation are common to the markets in which the product is sold  Prepare a contribution format segmented income statement for the handbag product line with segments defined as markets  3   Refer to the statement prepared in ( 1 ) above  The sales manager wants to run a special promotional campaign on one of the product lines over the next month  A marketing study indicates that such a campaign would increase sales of the Garments product line by R 2 1 1 , 0 0 0 or sales of the shoes product line by R 1 5 6 , 0 0 0   The campaign would cost R 4 1 , 0 0 0   a   Compute the increased operating income for these product lines for the expected increased sales  b   Based on the above results, which product line should be chosen  multiple choice Garments Shoes

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Severo S . A . of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement ( in terms of

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