(Solved by Humans)-Problem 13-42 Keep or Drop AudioMart is a retailer of radios, stereos, and televisions. The store...

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Problem 13-42  Keep or Drop AudioMart is a retailer of radios, stereos, and televisions. The store carries two portable sound systems that have radios, tape players, and speakers. System A, of slightly higher quality than System B, costs $20 more. With rare exceptions, the store also sells a headset when a system is sold. The headset can be used with either system. Variable-costing income statements for the three products follow:     System A System B   Headset   Sales $45,000 $ 32,500   $8,000   Less: Variable expenses 20,000 25,500   3,200   Contribution margin $25,000 $   7,000   $4,800   Less: Fixed costs* 10,000 18,000   2,700   Operating income $15,000 $(11,000)   $2,100     * This includes common fixed costs totaling $18,000, allocated to each product in proportion to its revenues.   The owner of the store is concerned about the profit performance of System B and is considering dropping it. If the product is dropped, sales of System A will increase by 30%, and sales of head- sets will drop by 25%. (Note: Round all answers to the nearest whole number.) Required: 1.       Prepare segmented income statements for the three products using a better format. 2.       CONCEPTUAL CONNECTION Prepare segmented income statements for System A and the headsets assuming that System B is dropped. Should B be dropped? 3.       CONCEPTUAL CONNECTION Suppose that a third system, System C, with a similar quality to System B, could be acquired. Assume that with C the sales of A would remain unchanged; however, C would produce only 80% of the revenues of B, and sales of the headsets would drop by 10%. The contribution margin ratio of C is 50%, and its direct fixed costs would be identical to those of B. Should  System B be dropped  and  replaced with System C?