Vega Foods, Inc., has recently purchased a small mill that it intends to operate as one of its subsidiaries. The newly acquired mill has three products that it offers for salewheat cereal, pancake mix, and flour. Each product sells for $10 per package. Materials, labor, and other variable production costs are $5.40 per bag of wheat cereal, $5.80 per bag of pancake mix, and $3.60 per bag of flour. Sales commissions are 10% of sales for any product. All other costs are fixed.

The mills income statement for the most recent month is given below:

				Product Line
	Total Company			Wheat Cereal			Pancake Mix			Flour
Sales	$	1,320,000		$	440,000		$	540,000		$	340,000
Expenses:
Materials, labor, and other		673,200			237,600			313,200			122,400
Sales commissions		132,000			44,000			54,000			34,000
Advertising		196,800			64,800			60,000			72,000
Salaries		120,600			52,000			29,400			39,200
Equipment depreciation		66,000			22,000			27,000			17,000
Warehouse rent		26,400			8,800			10,800			6,800
General administration		72,000			24,000			24,000			24,000
Total expenses		1,287,000			453,200			518,400			315,400
Net operating income (loss)	$	33,000		$	(13,200)		$	21,600		$	24,600

The following additional information is available about the company:

a.	The same equipment is used to mill and package all three products. In the above income statement, equipment depreciation has been allocated on the basis of sales dollars. An analysis of equipment usage indicates that it is used 30% of the time to make wheat cereal, 60% of the time to make pancake mix, and 10% of the time to make flour.
b.	All three products are stored in the same warehouse. In the above income statement, the warehouse rent has been allocated on the basis of sales dollars. The warehouse contains 52,800 square feet of space, of which 8,000 square feet are used for wheat cereal, 14,000 square feet are used for pancake mix, and 30,800 square feet are used for flour. The warehouse space costs the company $.50 per square foot per month to rent.
c.	The general administration costs relate to the administration of the company as a whole. In the above income statement, these costs have been divided equally among the three product lines.
d.	All other costs are traceable to the product lines.

Vega Foods management is anxious to improve the mills 2.50% margin on sales.

Required:

1.

Prepare a new contribution format segmented income statement for the month. Adjust the allocation of equipment depreciation and warehouse rent as indicated by the additional information provided. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your final answers to the nearest dollar amount. Omit the "$" sign in your response.)

	Total Company	Wheat Cereal	Pancake Mix	Flour
(Click to select)Net operating income (loss)Sales commissionsSalesMaterials, labor & otherSalariesGeneral administrationAdvertisingContribution margin	$	$	$	$
Variable expenses:
(Click to select)SalariesEquipment depreciationSalesMaterials, labor, and otherContribution marginGeneral administrationNet operating income (loss)Advertising
(Click to select)Net operating income (loss)SalariesEquipment depreciationSales commissionsSalesAdvertisingGeneral administrationContribution margin
Total variable expenses
(Click to select)Net operating income (loss)Equipment depreciationSalariesSales commissionsContribution marginWarehouse rentAdvertisingSales
Traceable fixed expenses:
(Click to select)SalesGeneral administrationAdvertisingContribution marginProduct line segment marginSales commissionsMaterials, labor & otherNet operating income (loss)
(Click to select)Materials, labor & otherContribution marginSalesSales commissionsGeneral administrationNet operating income (loss)Product line segment marginSalaries
(Click to select)Contribution marginSalesMaterials, labor & otherSales commissionsNet operating income (loss)Equipment depreciationGeneral administrationProduct line segment margin
(Click to select)SalesProduct line segment marginNet operating income (loss)General administrationSales commissionsWarehouse rentMaterials, labor & otherContribution margin
Total traceable fixed expenses
(Click to select)SalariesAdvertisingContribution marginNet operating income (loss)Materials, labor & other, Sales commissionsSales commissionsSalesProduct line segment margin	$	$	$	$
Common fixed expenses:
(Click to select)General administrationAdvertisingSales commissionsMaterials, labor & otherEquipment depreciationContribution marginSalesSalaries
(Click to select)General administrationSalariesNet operating income (loss)Sales commissionsContribution marginAdvertisingMaterials, labor & otherSales	$

2.	After seeing the income statement in the main body of the problem, management has decided to eliminate the wheat cereal because it is not returning a profit, and to focus all available resources on promoting the pancake mix.

a.

Based on the statement you have prepared, do you agree with the decision to eliminate the wheat cereal?

	Yes
	No