Shown below is a segmented income statement for Mullett Marinas three main boating service lines:

Winter Storage Boat Fuel & Concessions Boat Maintenance

Total Sales revenue $4,000,000 $1,000,000 $5,000,000 $10,000,000

Less: Variable expenses 2,000,000 200,000 4,900,000 7,100,000

Contribution margin $2,000,000 $ 800,000 $ 100,000 $2,900,000

Less direct fixed expenses: Garage/warehouse rent 700,000 55,000 350,000 1,105,000

Supervision 50,000 70,000 150,000 270,000

Equipment depreciation 250,000 75,000 100,000 425,000

Segment margin $1,000,000 $ 600,000 $ (500,000) $1,100,000

Mulletts management is deciding whether to keep or drop the Boat Maintenance service line. Mulletts Boat Maintenance service line has a contribution margin of $100,000 (sales of $5,000,000 less total variable costs of $4,900,000). All variable costs are relevant. Relevant fixed costs associated with this line include 60% of Boat Maintenances garage/warehouse rent and 50% of Boat Maintenances supervision salaries.

Required:

2. List the relevant benefits and costs for each alternative. Note: Enter all amounts as positive numbers except loss, if applicable.

Boat Maintenance Differential

Keep Drop Amount

Sales

Less: Variable expenses

Contribution margin

Less: Garage/warehouse rent*

Supervision

Total relevant benefit (loss)