Show me the steps to solve Keep or Drop

AudioMart is a retailer of vintage vinyl records and equipment. The store carries two popular sound systems$$System A and System B$.$ System A$,$ of slightly higher quality than System B$,$ costs $$22$ more. With rare exceptions, the store also sells a specialized headset when a system is sold. The headset can be used with either system. Variable$-$costing income statements for the three products follow:

Line Item Description System A System B Headset

Sales $$45,100$ $$32,500$ $$8,200$

Less: Variable expenses $20,30026,0003,100$

Contribution margin $$24,800$ $$6,500$ $$5,100$

Less: Fixed costs $*10,40018,1002,600$

Operating income $($loss$)$ $$14,400$ $$(11,600)$ $$2,500$

$*$This includes common fixed costs totaling $$18,100,$ allocated to each product in proportion to its revenues.

The owner of the store is concerned about the profit performance of System B and is considering dropping it$.$ If the product is dropped, sales of System A will increase by $32\%,$ and sales of headsets will drop by $25\%.$ Round all answers to the nearest whole number.

Required:

Question Content Area

$1.$ Prepare segmented income statements for the three products. Round your answers to the nearest dollar. Input expenses as positive numbers.

AudioMart

Segmented Income Statement

System A$,$ System B$,$ and Headset

Line Item Description System A System B Headset Total

Sales

$Sales

$45,100$

$Sales

$32,500$

$Sales

$8,200$

$Sales

$85,800$

Less: Variable expenses

Less: Variable expenses

$20,300$

Less: Variable expenses

$26,000$

Less: Variable expenses

$3,100$

Less: Variable expenses

$49,400$

Contribution margin

$Contribution margin

$24,800$

$Contribution margin

$6,500$

$Contribution margin

$5,100$

$Contribution margin

$36,400$

Less: Direct fixed cost

Less: Direct fixed cost

Less: Direct fixed cost

Less: Direct fixed cost

Less: Direct fixed cost

$13,000$

Segment margin

$Segment margin

$Segment margin

$Segment margin

$Segment margin

$23,400$

Less: Common fixed cost

Less: Common fixed cost

$18,100$

Operating income

$Operating income

$5,300$