Structuring a Keep-or-Drop Product Line Problem with Complementary Effects Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines Strip Plank Parquet Total Sales revenue $400.000 $200,000 $300,000 $900,000 Less Variable expenses 225,000 120,000 250,000 595,000 Contribution margin $175,000 $30,000 $50,000 $305,000 Less direct fixed expenses Machine rent (5,000) (20,000) (30,000) 55,000) Supervision (15,000) (10,000) (5,000) (30,000) Depredation (35.000) (10,000) (25,000)) (70,000) Segment margin $120,000 $40,000 1 (10,000) $150,000 Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $50,000 (sales of $300,000 less total variable costs of $250, variable costs are relevant Relevant fixed costs associated with this line include 80% of parquet's machine rest and all of parquet's supervision salaries. In addition, assume that dropping the parquet product line would reduce sales of the stripe 20% and sales of the plank Sine by 20% All other information reikains the same Required: 1. If the parquet product line is drooped, what is the contibution margin for the strip e 40,350 X For the plank Sne 21,000 X 2. Which alternative (kerp or drop the parquet product sne) is now move cost effective and by how much? Keep 16,000