Shown below is a segmented income statement for Mullett Marina's three main boating service lines: Refer to the information for Mullett Marina above. Mullett's management is deciding whether to keep or drop the Boat Maintenance service line. Mullett's Boat Maintenance service line has a contribution margin of $100,000 (sales of $5,000,000 less total variable costs of $4,900,000). All variable costs are relevant. Relevant fixed costs associated with this line include 60% of Boat Maintenance's garage/warehouse rent and 50% of Boat Maintenance's supervision salaries. Required: 1. List the alternatives being considered with respect to the Boat Maintenance service line.

2. List the relevant benefits and costs for each alternative.

3. Which alternative is more cost effective and by how much? Refer to the information for Mullett Marina above. Relevant fixed costs associated with this line include 60% of Boat Maintenance's garage/warehouse rent and 50% of Boat Maintenance's supervision salaries. In addition, assume that dropping the Boat Maintenance service line would reduce sales of the Winter Storage line by 20% and sales of the Boat Fuel & Concessions line by 10%. All other information remains the same. Required: 1. If the Boat Maintenance service line is dropped, what is the contribution margin for the Boat Fuel & Concessions line? For the Winter Storage line?

2. Which alternative (keep or drop the Boat Maintenance line) is now more cost effective and by how much?

	Winter storage	Boat fuel & concessions	Boat maintenance	Total
Sales salaries	4,000,000	1,000,000	5,000,000	10,000,000
Less: Variable expense	2,000,000	200,000	4,900,000	7,100,000
Contribution margin	2,000,000	800,000	100,000	2,900,000
Less: Direct fixed expenses
Garage/warehouse rent	(700,000)	(55,000)	(350,000)	(1,105,000)
Supervision	(50,000)	(70,000)	(150,000)	(270,000)
Equipment depreciation	(250,000)	(75,000)	(100,000)	(425,000)
Segment margin	1,000,000	600,000	(500,000)	1,100,000