Severo SA of Sao Peulo, Brazil. Is organized into two divisions. The compary's contributlont foumat segmerised inceme statement in terins of the frazian curiency the reat, R) for likt month is given befow Top management can't understand why the Leather Dwision thas such a low segment inargin when its soles are onix iow lwas tham soles in the Cioth Division. As one step in isolating the problen, managernent has directed that the Leather Divion be furtiver segmented into product lines. The following information is availabie on the product lines in the Leather Dision: Analysis shows that Rto4,000 of the Leather Dwision's selling and administrative expenses are common to the product ines. Requined: 1. Prepere a contribution format segmented income statement for the Leather Division, with segments defined as protuct ings: 2. Management is surprised by the handbag product line's poor showinq and would like to have the product line seqmented by 2. Management is surprised by the handbag product lines poor showing and would kke to have the sirodict line seginented by market. The following information is available about the maskets in which the hanobog line is sold: All of the handbag prodact line's seiling and administrative expenses and depieclation are comenon to the itarkets in wich the product is sold. Prepare a contribution format segmented income statement for the handbag produd line with setments defneet as makkets. 3. Refer to the statement peepared in (1) above. The sales manager wants to run a spedal promobonal carriaign on one of the prodict lines over the next month. A marketing study indicates that such a campalgn would increase sales of the Garrments protuct lice ty R203,000 or sales of the shoes product line by Ri48,000. The campaign would cost R33,000 o. Compute the increased operating income for these product tines for the expected increased sales. b. Based on the above results, which product line should be chosen? Shoes Garments Severo SA of Sao Peulo, Brazil. Is organized into two divisions. The compary's contributlont foumat segmerised inceme statement in terins of the frazian curiency the reat, R) for likt month is given befow Top management can't understand why the Leather Dwision thas such a low segment inargin when its soles are onix iow lwas tham soles in the Cioth Division. As one step in isolating the problen, managernent has directed that the Leather Divion be furtiver segmented into product lines. The following information is availabie on the product lines in the Leather Dision: Analysis shows that Rto4,000 of the Leather Dwision's selling and administrative expenses are common to the product ines. Requined: 1. Prepere a contribution format segmented income statement for the Leather Division, with segments defined as protuct ings: 2. Management is surprised by the handbag product line's poor showinq and would like to have the product line seqmented by 2. Management is surprised by the handbag product lines poor showing and would kke to have the sirodict line seginented by market. The following information is available about the maskets in which the hanobog line is sold: All of the handbag prodact line's seiling and administrative expenses and depieclation are comenon to the itarkets in wich the product is sold. Prepare a contribution format segmented income statement for the handbag produd line with setments defneet as makkets. 3. Refer to the statement peepared in (1) above. The sales manager wants to run a spedal promobonal carriaign on one of the prodict lines over the next month. A marketing study indicates that such a campalgn would increase sales of the Garrments protuct lice ty R203,000 or sales of the shoes product line by Ri48,000. The campaign would cost R33,000 o. Compute the increased operating income for these product tines for the expected increased sales. b. Based on the above results, which product line should be chosen? Shoes Garments
