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Rose Apothecary is "a general store, but it's also a very specific store. It's also not just a store, it's a place where people can come and get coffee or drinks, but it's not a coffee shop, nor is it a bar. It's an environment." Rose Apothecary sell three different types of products: body care, local cheeses, and wines. The company is considering dropping its body care line, as it is showing a loss, and adding a Home Goods line. The following income statement was available for the month:

Body Care

Cheese

Wine

Sales Revenue

$$9,750$

$$15,000$

$$27,000$

$($COGS$)$

$(8,000)$

$(7,500)$

$(9,000)$

Gross Profit

$1,750$

$7,500$

$18,000$

$($Opex$)$

$(2,500)$

$(2,000)$

$(1,000)$

OPY

$(750)$

$5,500$

$17,000$

For all three current segments, $25\%$ of COGS is variable product costs. The remainder is direct fixed product costs. $25\%$ of opex is variable period cots and the remainder is common fixed costs.

If Rose Apothecary adds the Home Goods line, sales are expected to be $$34,000,$ with variable costs equaling $10\%$ of sales, and traceable fixed costs of $$15,000.$ Adding the Home Goods line is expected to increase sales in the Cheese and Wine departments by $20\%.$

Which of the following statements is correct?

Question $2$ options:

If the Body care segment is dropped and the Home Goods line is added in its place, Operating Income will increase by $$21,900.$

The operating income under the traditional income statement is greater than the operating income under the Segmented income statement.

The Body Care segment is a losing segment and should be dropped even if nothing else will be sold in its place.

If the Home Goods line is added, common fixed costs will increase by $$15,000.$

If the Body Care segment is dropped and nothing is added in its place, Operating Income will increase by $$750.$

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