When MrDing L *These Traceable Expenses Could Be Eliminated If the Product Lines

Essay

When Mr.Ding L.Berry,president and chief executive 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? I'm starting immediate steps to eliminate those two unprofitable lines!"

$\begin{array}{lcccc}\begin{array}{l}\\\text { Sales }\\\text { Variable expenses }\\\text { Contribution margin } \\\text { Traceable fixed expenses* } \\\text { Common expenses, allocated } \\\text { Operating income (loss) } \end{array}\begin{array}{l}\underline { \text { Total } }\\\$ 250,000\\119,000\\131,000\\=98,000\\32,900\\\$ 100\end{array}\begin{array}{c}\underline { \mathrm { U } } \\\$ 100,000 \\37,500\\63,000\\31,000 \\\$ 18,000 \\\$ 14,000\end{array}\begin{array}{c}\underline { \mathrm { V } }\\\$ 75,000 \\35,000 \\ 40,000 \\37,000 \\10,500 \\\$(7,500)\end{array}\begin{array}{c} \underline { \mathrm { W } } \\\$ 75,000 \\47,000\\28,000 \\30,000 \\\$ 4,400 \\\$(6,400)\end{array}\end{array}$

*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.