Style focused exclusively on personalized custom-made suits and dress shirts for men. Since incorporation, sales had grown each year. Style earned $600,000 in revenue for fiscal year 2015. See Exhibit 1 for Style's product line pricing and costs. One of the biggest success factors for Style was strong customer retention; a vast majority of customers continued to buy dress shirts and suits from Style each year. Gavidia and Dineda attributed this customer retention to their personalized service for each customer and their diverse product offerings. With no retail storefront, Style kept its fixed costs low at between 5 and 8 per cent of revenues. The most significant fixed cost was a $78 per square foot annual rental expense for 400 square feet of storage space needed to hold inventory. This cost control was responsible for Style's higher-than-average industry profit margins and sufficient cash flow to pay the owners healthy dividends annually. Style aimed for a contribution margin above 35 per cent on all its clothing lines. Gavidia and Dineda knew that sales volume made a significant impact on the contribution each clothing line earned for the company. Considering these factors, Gavidia and Dineda set a total target contribution of $25,000 annually from each clothing line. Gavidia and Dineda were considering whether to stop offering their least profitable product line. If a clothing line were discontinued, the owners would need to recover that line's lost contribution from elsewhere in the business. They were prepared to spend an additional $5,000 on advertising to increase the revenues earned on the remaining clothing lines. Gavidia and Dineda believed that a weighted average contribution margin for each of its seven clothing lines would be the best way to evaluate this decision's feasibility. They expected sales of the remaining clothing lines would remain at their same proportions of total sales. EXHIBIT 1: STYLE INC.'S PRODUCT LINE PRICING AND COSTS DRESS SHIRT PRODUCT LINES Classic Shirt Premium Shirt $75.00 $95.00 5 15 Retail selling price Per cent of total sales Executive Shirt $125.00 15 Tailoring costs Shipping costs $7.50 $48.50 $9.25 $58.75 $10.75 $69.25 SUIT PRODUCT LINES Coat Classic Suit Premium Suit $395.00 $475.00 $625.00 10 15 15 Retail selling price Per cent of total sales Executive Suit $850.00 25 Tailoring costs Shipping costs $28.35 $181.65 $25.50 $29.00 $163.50 $186.00 Source: Company files. $33.10 $211.90 Question: 1. Calculate the unit contribution, total contribution, and contribution margin rate for each of the seven clothing lines. Does any product lines earn a contribution margin rate lower than either the company's target contribution of 35 per cent per clothing line or the annual total target contribution of CA$25,000? (300 words)