I need help on questions 2. & 3.

Keep Or Drop Decision, Alternatives, Relevant costs Reshier Company makes three types of rug shampooers, Model 1 l 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 Model 2 Model 3 Total Sales $255,000 5594,000 $647,500 $1,496,500 Less variable costs of goods sold (93,000) (178,600) (364,400) (636,000) Les commissions (5,300) (27,500) (22,750) (55,550) Contribution margin $156,700 $387,900 $260,350 5804,950 Less common fixed expenses Faxed factory overhead (390,000) Fixed selling and administrative (311,000) Operating income $103,950 While al models have positive contribution margins, Rether 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 bothered: Driver Usage by Model Activity Activity Cost Activity Driver Model 1 Model 2 Model 3 Engineering $75,000 Engineering hours 780 70 150 Check My Work Previous Email Instructor Save and Exit Submk Assignment for Grading eBook Activity Engineering Setting up Customer service Driver Usage by Model Model 1 Model 2 Model 3 70 150 12,500 13,200 29,150 13,400 1,600 19,150 Activity Cost Activity Driver $75,000 Engineering hours 183,000 Setup hours 116,000 Service calls 780 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 round Interim calculations and, if required, round your answer to the nearest dollar. If amount box does not require an entry, Inave it blank or enter "o Total Reshier Company Segmented Income Statement Model: Model 2 255.000 54.000 1.000 -17.00 Model 617.500 -364,400 149.00 436,000 -5.300 -17.500 -22.750 55.650 Sales Less variable cost of goods sold Less commissions Contribution margin Less traceable fixed expenses: Engineering 156,700 187,900 2007 304,950 -58.500 250 11.250 -75.000 Previous Check My Work Email Instructor Save and Exit Submit Assignment for Grading eBook Interim calculations and, if required, round your answer to the nearest dollar. If amount box does not require an entry, leave it blank or entero 2 Reshier Company Segmented Income Statement Model 1 Model 2 265.000 S. Model 17.500 Sales Total 14.500 46.000 Less variable cost of goods sold 92.000 -17.00 6440 100 27.500 11.750 Less commissions 156700 387.900 200.150 04.050 250 - 11.25 -78,000 Contribution margin Less traceable fixed expenses Engineering Setting up Equipment rental Customer service -41.75 -11.000 -1000 -47.255 o 21.000 21.00 ** 116.000 -1002 3119 MW 409.050 Product margin Loss common fixed expenses Factory overhead Selling and adminexpense 111,000 105,00 10. Operating income Previous Check My Work Email Instructor Save and Exit Submit Assignment for Grading Selling and admin. expense -195,000 Operating income 103,950 Feedback Chea My Wor 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 fixed 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 Reshier 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 nixed costs can be avoided.) Do NOT round interim calculations and required, round your answer to the nearest dollar Dropping Model 1 will add to operating income 3. What if Reshier Company can only avoid 462 hours of engineering time and 4,800 hours of setup time that are attributable to Model 17 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 to operating income will add Check My Work Previous Email Instructor Save and Exit Submit Assignment for Grading