Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazlian 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 30 : 1 ess 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 avallable on the product lines in the Leather Divion? Required: 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines. product is sold. Prepare a contribution tormat segmented income statement tor the handbag product line with segments detined 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 R203,000 or sales of the shoes product line by R148,000. The campaign would cost R33,000 o. Compute the increased operating income for these product lines for the expected increased sales. * Answer is complete but not entirely correct. b. Based on the above results, which product line should be chosen? Shoes Garments Top management can't understand why the Leather Division has such a low segment margin when its sales are only 30% less than sales in the Cloth Division. As one step inisolating 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