A contribution format income statement for the most recent year

for Big Bear Consumer Electronics Inc. is shown below.

Total Department AM$/$FM radios HD radios

Sales $$320,000100\%$ $$270,000100\%$ $$50,000100\%$

Less variable

expenses

$236,00074\%216,00080\%20,00040\%$

Contribution

Margin

$84,00026\%54,00020\%30,00060\%$

Less Traceable

Fixed Expenses

$15,0005\%10,0004\%5,00010\%$

Segment Margin $69,00022\%$ $$44,00016\%$ $$25,00050\%$

Less Common

Fixed Expenses

$40,00013\%$

Net Operating

Income

$$29,0009\%$

PROBLEM BACKGROUND:

Shortly after graduating with a business degree from Bridgewater State University, you

are hired as an assistant to the District Manager of a national consumer electronics chain.

During your first day on the job, you attend a meeting regarding product lines carried by

the chain. You learn about a fairly new innovation called HD $($high definition$)$ radio.

This product allows consumers to listen to not only traditional AM and FM bands, but

also to the newly created HD frequencies that most local radio stations are broadcasting

free of charge to listeners on adjacent frequencies that previously were unused. Unlike

satellite radio, this service requires no subscription charges. Consumers who have heard

HD radio tell you that AM$-$HD broadcasts sound like FM and FM$-$HD broadcasts sound

like CD quality! Due to improved manufacturing technologies, the cosst to manufacture HD radios has dropped dramatically.