Structuring a Keep-or-Drop Product-Line Problem with Complementary Effects Shown below is a segmented income statement for Mullett Marina's three main boating service lines: Winter Boat Boat Fuel & Concessions Total Storage Maintenance Sales revenue $1,000,000 $5,000,000 $10,000,000 $4,000,000 2,000,000 Less: Variable expenses 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 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: 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? Contribution Margin Winter storage line Boat fuel & concessions line 2. Which alternative (keep or drop the Boat Maintenance line) is now more cost effective and by how much? Complete the keep or drop analysis to decide between the alternatives. Keep Differential Amount Drop Drop Contribution margin Less: Garage/warehouse rent Supervision Total relevant benefit (loss) The company is better off b if it the Boat Maintenance line