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: Divisions Total Company R 3,850,000 1,870,000 Cloth 1,050,000 1,150,000 Leather 820,000 830,000 Sales R 2,200,000 R 1,650,000 Variable expenses Contribution margin Traceable fixed expenses: 1,980,000 Advertising Selling and administrative Depreciation 692,000 526,000 247,000 390,000 300,000 124,000 302,000 226,000 123,000 Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income 1,465,000 14,000651,000 515,000 R 336,000 R 179,000 399,000 R 116,000 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: Leather Division Product Lines Shoes R800,000R350,000 R500,000 Sales Traceable fixed expenses Advertising Selling and administrative Depreciation R 59,000 R 39,000 R 28,000 R121,000R122,000 R 44,000 R 60,000 R 65,000R 30,000 Variable expenses as a percentage of sales 65% 40% 50% Analysis shows that R83,000 of the Leather Division's selling and administrative expenses are common to