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Diversified Products, Inc., has recently acquired a small publishing company that offers three books for sale-a cookbook, a travel guide, and a handy speller. Each book sells for S11. The publishing company s most recent monthly income statement is given below: Product Line Travel Handy Company Cookbook Guide Speller Sales 305,000 92,000 $152,000 61,000 Expenses: Printing costs 103,000 28,000 63,100 11,900 Advertising 37,000 13,600 20,000 3,400 General sales 18,300 5,520 9.120 3.660 Salaries 34,000 19,000 9.100 5,900 Equipment depreciation 6,000 2,000 2,000 2,000 Sales commissions 30,500 9.200 15.200 6,100 General administration 42,300 14,100 14.100 14,100 Warehouse rent 12,200 3,680 6,080 2,440 Depreciation-office facilities 3,300 1.100 1.100 1,100 Total expenses 286,600 96,200 39,800 50,600 Net operating income (loss) 18,400 (4,200) 12,200 10,400 The following additional information is available about the company. a. Only printing costs and sales commissions are variable; all other costs are fixed. The printing costs (which include materials, labor, and variable overhead) are traceable to the three product lines as shown in the statement above. Sales commissions are 10% of sales for any product. b.The same equipment is used to produce all three books, so the equipment depreciation cost has been allocated equally among the three product lines. An analysis of the company's activities indicates that the equipment is used 20% of the time to produce cookbooks, 50% of the time to produce travel guides, and 30% of the time to produce handy spellers. c. The warehouse is used to store finished units of product, so the rental cost has been allocated to the product lines on the basis of sales dollars. The warehouse rental cost is $3 per square foot per year. The warehouse contains 48,800 square feet of space, of which 7,400 square feet is used by the cookbook line, 24,200 square feet by the travel guide line, and 17.200 square feet by the handy speller line. d. The general sales cost above includes the salary of the sales manager and other sales costs not traceable to any specific product line. This cost has been allocated to the product lines on the basis of sales d e. The general administration cost and depreciation of office facilities both relate to administration of the company as a whole. These costs have been allocated equally to the three product lines. All other costs are traceable to the three product lines in the amounts shown on the statement above The management of Diversified Products. Inc. is anxious to improve the publishing company's 4% return on sales