Severo S.A. of Sao Paulo, Brazil, Is organized into two divisions he company's Contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Divisions Total Company Cloth Leather Sales R 4,637,500 R 2,650,000 R 1,987,500 Variable expenses 2,171,725 1,120,000 1,051,725 935,775 Contribution margin 2,465,775 1,530,000 Traceable fixed expenses 460,000 805,000 Advertising 345,000 370,000 233,000 603,000 Selling and administrative 131,000 Depreciation 261,000 130,000 708,000 Total traceable fixed expenses 1,669,000 961,000 Divisional segment margin 796,775 R 569,000 R 227,775 406,000 Common fixed expenses R 390,775 Operating income Top management can't understand why the Leather Division has such a low segment margin when its sales are only 25% 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