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: Sales Variable expenses Contribution margin Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income Divisions Total Company Cloth R 4,675,000 2,213,000 2,462,000 2,750,000 Leather 1,925,000 1,140,000 1,073,000 1,610,000 852,000 810,000 480,000 330,000 625,000 390,000 235,000 265,000 1,700,000 133,000 1,003,000 132,000 697,000 762,000 R 607,000 IN 155,000 400,000 354,000 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 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 Divisionre Sales Traceable fixed expenses Advertising Selling and administrative Depreciation Variable expenses as percentage of sales Leather Division Product Lines Garmenta R600,000 Shoes 8420,000 Handbags 425,000 60,000 85,000 8179,000 4,000 $1,000 37,000 24,000 65% 500% 40,000 21,000 52% Pu 109 Next >