Segmented income statement Vogel Co. produces three models of heating and air conditioning thermostat components. The following table summarizes data about each model: BV19 HV41 MV1 Selling price per unit $36 $60 $30 Contribution margin per unit 12 18 6 Units sold per month 4,000 2,000 6,000 Total contribution margin $48,000 $36,000 $36,000 Direct fixed expenses 21,600 17,100 24,300 Segment margin $26,400 $18,900 $11,700 Allocated company fixed expenses 10,000 5,000 15,000 Operating income (loss) $16,400 $13,900 $(3,300) Required:
a. Criticize the preceding presentation. On what basis does the $30,000 of company fixed expenses appear to be allocated?
b. Calculate the effect on total company net income if the MV12 model were discontinued.
c. Calculate the contribution margin ratio for each model. d. If an advertising campaign focusing on a single model were to result in an increase of 5,000 units in the quantity of units sold, which model should be advertised? Explain your answer.
e. If an advertising campaign focusing on a single model were to result in an increase of $15,000 in revenues, which model should be advertised?