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: Total Company Sales Divisions Cloth 2,300,000 1,020,000 Leather R 1,886,000 R Variable expenses Contribution margin R 4,186,000 1,874,760 2,311,240 854,760 1,031,240 1,280,000 Traceable fixed expenses: Advertising 760,000 360,000 400,000 Selling and administrative 270,000 300,000 Depreciation 570,000 241,000 121,000 120,000 Total traceable fixed expenses 1,571,000 751,000 820,000 Divisional segment margin R 529,000 R 211,240 740, 240 396,000 Common fixed expenses Operating income R 344,240 Top management can't understand why the Leather Division has such a low segment margin when its sales are only 18% 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 Handbags Sales Garments R560,000 R750,000 R576,000 Traceable fixed expenses: Advertising Selling and administrative R 86,000 R 36,000 R 25,000 60% Depreciation R118,000 R 41,000 R 62,000 30% R196,000 R 42,000 R 33,000 51% Variable expenses as a percentage of sales Analysis shows that R181,000 of the Leather Division's selling and administrative expenses are common to the product lines. Required: 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines.