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Diversified Products, Inc., has recently acquired a small publishing company that Diversified Products intends to operate as one of its investment centers. The newly acquired company has three books that it offers for sale-a cookbook, a travel guide, and a handy speller. Each book sells for $11.7. The publishing company's most recent monthly income statement is given below:
$
311,000
93,300
155,500
62,200
3,000
1,000
20,280
(8,346
)
16,490
12,136
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 12% of sales for any product.
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 35% of the time to produce cookbooks, 50% of the time to produce travel guides, and 15% of the time to produce handy spellers.
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 $3 per square foot per year. The warehouse contains 54,000 square feet of space, of which 8,100 square feet is used by the cookbook line, 27,000 square feet by the travel guide line, and 18,900 square feet by the handy speller line.
The general sales cost above includes the salary of the sales manager and other sales costs not traceable to any specific product line. This cost has been allocated to the product lines on the basis of sales dollars.
The general administration cost and depreciation of office facilities both relate to administration of the company as a whole. These costs have been allocated equally to the three product lines.
The management of Diversified Products, Inc., is anxious to improve the new investment center's 5% return on sales.
Prepare a new contribution format segmented income statement for the month. Adjust allocations of equipment depreciation and of warehouse rent as indicated by the additional information provided. (Omit the "$" sign in your response.)
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