QUESTION:

FORMAT, Please answer in Excel.

40. Product Line Decision. The following monthly segmented income statement is for South Side LLC. Product Lines Total Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) $37,500 16,000 $21,500 19,500 3,750 $(1,750) $50,000 27,500 $22,500 16,000 5,000 $ 1,500 $12,500 5,000 $ 7,500 3,500 1,250 $ 2,750 $100,000 48,500 51,500 39,000 10,000 S 2,500 Management is concerned about the losses associated with product line A and is considering dropping this product line. Allocated fixed costs are assigned to product lines based on sales. If product line A is eliminated, total allocated fixed costs are assigned to the remaining product lines, and all variable and direct fixed costs for product line A will be eliminated Required: a. Perform differential analysis using the format presented in Figure 7.6. Assume keeping all product lines is Alternative 1, and dropping product line A is Alternative 2. b. Which alternative is best? Explain. c. Summarize the result of dropping product line A using the format presented in Figure 7.7. d. Explain why the loss shown for product line A in the segmented income statement might be misleading to management