Question 2 (10 mins, 10 marks)

When Mr. Ding L. Berry, president of Berry Inc., first saw the segmented income statement below, he flew into his usual rage. When will we ever start showing a real profit? Im starting immediate steps to eliminate those two unprofitable lines!

		Product Lines
	Total	U	V	W
Sales	$ 250,000	$ 100,000	$ 75,000	$ 75,000
Variable Expenses	119,000	37,000	35,000	47,000
Contribution Margin	131,000	63,000	40,000	28,000
Traceable Fixed expenses*	98,000	31,000	37,000	30,000
Common expenses allocated	32,900	18,000	10,500	4,400
Operating Income/Loss	$ 100	$ 14,000	$ (7,500)	$ (6,400)

* These traceable expenses could be eliminated if the product lines to which they are traced were discontinued.

Required:

Recommend which segments, if any, should be eliminated. Prepare a report in good form to support your answer.