Keep or Drop AudioMart is a retailer of vintage vinyl records and equipment. The store carries two popular sound systems-System A and System B. System A, of slightly higher quality than System B, costs $18 more. With rare exceptions, the store also sells a specialized headset when a system is sold. The headset can be used with either system. Variable-costing income statements for the three products follow: System A System B Headset Sales $44,800 $32,900 $8,100 Less: Variable expenses 20,000 25,000 3,100 Contribution margin $24,800 $7,900 $5,000 Less: Fixed costs * 9,900 18,100 2,700 Operating income (loss) $14,900 $(10,200) $2,300 *This includes common fixed costs totaling $18,100, allocated to each product in proportion to its revenues. The owner of the store is concerned about the profit performance of System B and is considering dropping it. If the product is dropped, sales of System A will increase by 31%, and sales of headsets will drop by 24%. Round all answers to the nearest whole number. Required: 1. Prepare segmented income statements for the three products. Round your answers to the nearest dollar. Input expenses as positive numbers. AudioMart Segmented Income Statement System A, System B, and Headset Line Item Description System A System B Headset Total Sales 44,800 $ 32,900 8,100 $ 85,800 Less: Variable expenses 20,000 25,000 3,100 48,100 Contribution margin 24,800 7,900 5,000 $ 37,700 Less: Direct fixed cost
Keep or Drop AudioMart is a retailer of vintage vinyl records and equipment. The store carries two popular sound systems-System A and System B. System A, of slightly higher quality than System B, costs $18 more. With rare exceptions, the store also sells a specialized headset when a system is sold. The headset can be used with either system. Variable-costing income statements for the three products follow: System A System B Headset Sales $44,800 $32,900 $8,100 Less: Variable expenses 20,000 25,000 3,100 Contribution margin $24,800 $7,900 $5,000 Less: Fixed costs * 9,900 18,100 2,700 Operating income (loss) $14,900 $(10,200) $2,300 *This includes common fixed costs totaling $18,100, allocated to each product in proportion to its revenues. The owner of the store is concerned about the profit performance of System B and is considering dropping it. If the product is dropped, sales of System A will increase by 31%, and sales of headsets will drop by 24%. Round all answers to the nearest whole number. Required: 1. Prepare segmented income statements for the three products. Round your answers to the nearest dollar. Input expenses as positive numbers. AudioMart Segmented Income Statement System A, System B, and Headset Line Item Description System A System B Headset Total Sales 44,800 $ 32,900 8,100 $ 85,800 Less: Variable expenses 20,000 25,000 3,100 48,100 Contribution margin 24,800 7,900 5,000 $ 37,700 Less: Direct fixed cost
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Keep or Drop
AudioMart is a retailer of vintage vinyl records and equipment. The store carries two popular sound systems-System A and System B. System A, of slightly higher quality than System B, costs $18 more. With rare
exceptions, the store also sells a specialized headset when a system is sold. The headset can be used with either system. Variable-costing income statements for the three products follow:
System A
System B
Headset
Sales
$44,800
$32,900
$8,100
Less: Variable expenses
20,000
25,000
3,100
Contribution margin
$24,800
$7,900
$5,000
Less: Fixed costs *
9,900
18,100
2,700
Operating income (loss)
$14,900
$(10,200)
$2,300
*This includes common fixed costs totaling $18,100, allocated to each product in proportion to its revenues.
The owner of the store is concerned about the profit performance of System B and is considering dropping it. If the product is dropped, sales of System A will increase by 31%, and sales of headsets will drop by 24%.
Round all answers to the nearest whole number.
Required:
1. Prepare segmented income statements for the three products. Round your answers to the nearest dollar. Input expenses as positive numbers.
AudioMart
Segmented Income Statement
System A, System B, and Headset
Line Item Description
System A
System B
Headset
Total
Sales
44,800
$ 32,900
8,100
$ 85,800
Less: Variable expenses
20,000
25,000
3,100
48,100
Contribution margin
24,800
7,900
5,000
$ 37,700
Less: Direct fixed cost
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