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Common fixed cost Operating income 2. Conceptual Connection: Prepare segmented income statements for System A and the headsets assuming that System B is dropped. Round your answers to the nearest dollar. AudioMart Segmented In come Statement System A Headset Total Sales 63,700 E [l E 6,000 69,700 Variableexpenses l \"Joni [ ZADDI I 33,200l 3.600 3 6.500 Contribution margin 32,900 1.02 6 1.502 Direct xed costs \"7 Segmentmargin ' 321423 - 2.5\" I|ii| In! lli Common fixed costs H 9' Operating income '99\" Should B be dropped? Yes if @ 3. Conceptual Connection: Suppose that a third system, System C, with a similar quality to System B, could be acquired. Assume that with C the sales of A would remain unchanged; however, C would produce only 80% ofthe revenues of Br and sales of the headsets would drop by 10%. The contribution margin ratio of C is 50%, and its direct xed costs would be identical to those of B. If required, round your answers to the nearest dollar. Aud i oMa rt Se gm ented In com e Statem ent System A System C Headset Total Sales $| 45.500 26.000 Variable expenses I 22.000] I 13,000] I 2.830] 7.2 DI} 78,700 i j LA] E G Contribution margin$l 23.500] $| 13.000] $| 4.320] $| 40,320 Direct xed cost 474- 12.198 1,02 6 13,700 II] 802 Segment margin 23-323 '. 211% Common fixed cost 18,000 iii Operating income '- 9.120 @ @ Should System B be dropped and replaced with System C? The best choice is Dropping system B wimut replacement with system C v' Keep or Drop AudioMart is a retailer of radios, stereos, and televisions. The store carries two portable sound systems that have radios, tape players, and speakers. System A, of slightly higher quality than System B, costs $20- more. with rare exceptions, the store also sells a headset when a system is sold. The headset can be used with either system. Variablecosting income statements for the three products follow: System A System B Headset Sales $45,500 3; 32,500 $8,000 Less: Variable expenses 22,000 25,500 3,200 Contribution margin $23,500 95 2,000 $4,000 Less: Fixed costs\" 10,000 19,000 2,200 Operating income $13,500 $(12,000) $2,100 * This includes common xed costs totalling $18,000, allocated to each product in proportion to its revenues. The owner of the store is concerned about the prot performance of System B and is considering dropping it. If the product is dropped, sales of System A will increase by 40%, and sales of headsets will drop by 25%. Reg uired: 1. Prepare segmented income statements for the three products. For the allocation of the common xed costs, compute the percentage of revenue rst [in the order of the mathematical operations). In your computations, round any division to two decimal places and use rounded amounts in subsequent computations. Then, round your nal answers to the nearest dollar. Aud i oMa rt Se gm ented In com a Statem ent System A System B Headset Total Sales $l 45.500| J $| 32.5oo| J $[ 8.000' J $[ as,000| J Variable expenses 22.000 J 25,500 v' 3.200 J 50,700 J Contributionmargin$| 23.500 J $| men J $| 4.an vi $| 35,300 J Directxed cost I \"7| 1: | 12.193| x [ Lozs| x [ 13.no| J Segmentmargin $| 23.023 x $| 5.153 x $| 3.774 X I Common xed cost J
