How do I figure out 2. & 3.?

Keep-Or-Drop Decision, Alternatives, Relevant Costs Reshler Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry and wat-vacuuming capabilities, Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented Income statement is shown below Total Model 1 $255,000 (93,000) (5,300) $156,700 Sales Less variable costs of goods sold Les commissions Contribution margin Less common fixed expenses Fixed factory overhead Foed selling and administrative Operating income Model 2 $594,000 (178,600) (27,500) $387,900 Model 3 $647,500 (364,400) (22,750) $260,350 $1,496,500 (636,000) (55,550) 5804,950 (390,000) (311,000) $103,950 We all models have positive contribution margins, Resher Company is concerned because operating income is less than 10 percent of sales and is low for this type of Comparw. The company's controller gathered additional information on hxed costs to see why they were so high. The following information on activities and drivers was gathered Activity Engineering Activity Cost Activity Driver $75,000 Engineering hours Driver Usage by Model Model: Model 2 Model 3 70 150 700 ChedMy Work Previous All work waved Email intructor Save and ta Submit Asurmeforest Operating income 103,950 Foto Check My Work 1. Review what you have learned about segmented income statements in the chapter. To determine the traceable fixed costs, you will need to compute the activity rates for each activity to assign the costs of the activities to each product. Common foxed expenses are not traceable to the segments. They would remain even if one of the segments were eliminated, 2. Using your answer to Requirement 1, assume that Reshler Company is considering dropping any model with a negative product margin. What are the alternatives? Keeping Model 1 or dropping it which alternative is more cost effective and by how much? (Assume that any traceable fixed costs can be avoided.) Do NOT round interim calculations and, if required, round your answer to the nearest dollar. Dropping Model 1 will add to operating Income 3. What if Reshier Company can only avoid 162 hours of engineering time and 4,800 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 27 Which alternative is more cost effective and by how much? Do NOT round interim calculations and, if required, round your answer to the nearest dollar. Keeping Model 1 to operating income will add sl Cred My Work Previous All work saved Email Instructor Save and Exit Submit Assignment for Grading Keep Or Drop Decision, Alternatives, Relevant Costs Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry and wet-vacuuming capabilities. Model 3 is the heavy duty riding shampooer sold to hotels and convention centers. A segmented Income statement is shown below Model 1 $255,000 (93,000) (5,300) $156,700 Model 2 $594,000 (178,600) (27,500) $387,900 Sales Less variable costs of goods sold Les commissions Contribution margin Cess.commoned expenses: Fixed factory overhead Fixed selling and administrative Operating income Model 3 $647,500 (364.400) (22,750) $260,350 Total $1,496,500 (635,000) (55,550) 5804,950 (390,000) (311,000) 5103,950 1 While all models have positive contribution margins, Resher Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered: Activity Engineering Activity Cost Activity Driver $75.000 Engineering hours Driver Usage by Model Model 1 Model 2 Model 780 70 150 Cred: My Work Previous While all models have positive contribution margins, Reshler Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered Driver Usage by Model Activity Activity Cost Activity Driver Model 1 Model 2 Model 3 Engineering $75,000 Engineering hours 780 70 150 Setting up 183,000 Setup hours 12,500 13,200 29,150 Customer service 116,000 Service calls 13,400 1,600 19,150 In addition, Model 1 requires the rental of specialized equipment costing $21,000 per year. Required: 1. Reformulate the segmented income statement using the additional information on activities. Use a minus sign to indicate any negative margins. Do NOT Interim calculations and, if required, round your answer to the nearest dollar. If amount box does not require an entry, leave it blank or enter *o Sales Reshier Company Segmented Income Statement Model: Model 2 255.000 594,000 33,00 -178 100 -17.00 Model 617.500 Total 14.00 Les variable cost of soods sold Les commissions -364,400 360 23,750 55.550 Check My Work