Severo SA 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 Sales R 4,870,080 R 2,200,860 1,969,e00 1,e60,e00 R 1,878,809 909,800 Variable expenses Contribution margin Traceable fixed expenses: 2,101,00e 1,148,800 961,888 Advertising 790,009 590,000 249,000 400,000 310,080 125,000 398,809 280,009 124,000 Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income 1,629,008 835,000 794,000 472,000 R 305,000 R 167,000 400,000 R 72,000 Top management can't understand why the Leather Division has such a low segment margin when its sales are only 15% less than Top management can't understand why the Leather Division has such a low segment margin when its sales are only 15% 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 Garments ShoesHandba Sales Traceable fixed expenses: R500,000 R778,680 R600,800 Advertising Selling and administrative Depreciation R 90,000 R 40,000 R 29,099 R122,000 R 45,090 R 66,080 R178,886 R 62,00e R 29,08e Variable expenses as a percentage of sales 60% 30% 63% Analysis shows that R133,000 of the Leather Division's selling and administrative expenses are common to the product lines 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as pr Leather Garments Shoes s Handbags Traceable fixed expenses Total traceable fixed expenses Common fixed expenses Sales Traceable fixed expenses: R358,08 R250,800 Advertising Variable expenses as a percentage of sales R 58,080 R128,ee0 48% 84% All of the handbag product line's selling and administrative expenses and depreciation are common to the markets in which the product is sold. Prepare a contribution format segmented income statement for the handbag product line with segments defined as markets. Sales Market Handbags Domestic Foreign Traceable fixed expenses Common fixed expenses Total common fixed expenses 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 R210,000 or sales of the shoes product line by R155,000. The campaign would cost R40,000. o. Compute the increased operating income for these product lines for the expected increased sales Shoes Increased operating income b. Based on the above results, which product line should be chosen? Garments O Shoes