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- Question 16 The following income statement has been prepared for the most recent period for the house accessories segment of a furnitur & home dcor company. 8 points Segment Income Statement House Accessories $400,000 $120,000 12,000 28,000 160,000 240,000 Sales Less: Variable expenses Variable manufacturing costs Variable shipping costs Commissions Contribution margin Less: Fixed expenses General factory overhead Salary of line manager Depreciation of equipment Advertising Factory rent General admin. expenses Operating income / (loss) 28,000 62,000 31,500 55,000 78,000 27,000 281,500 (41,500) The company is deciding if it should keep or drop the house accessories division based on the following facts: General factory overhead would remain as a fixed expense if the house accessories segment is dropped. General administrative expenses would be reduced by 28% if the house accessories segment is dropped. If the company drops this segment, it will gain a contribution margin of $27,000 by manufacturing other products. The company will continue to pay rent to manufacture other products. What is the contribution margin lost if the house accessories segment is dropped? (enter as a positive number) (1 mark) Number Number What are the total fixed expenses that can be avoided if the house accessories segment is dropped? (enter as a positive number) (4 marks) Number What is the contribution margin gained if the company drops the house accessories segment? (1 mark) Number What is the net advantage or disadvantage of dropping this segment? (1 mark) Enter a disadvantage/loss as a negative number. Negative numbers should be entered with a negative sign, not brackets. Number Should the house accessories segment be kept or dropped? (1 mark) O The house accessories segment should be kept. O The house accessories segment should be dropped