The operating income will decrease. Product Line 2 income will be lost, but only the traceable costs of commissions, cost of sales, and salaries will be avoided. Accordingly, the decrease will be US $234,000 [$-700.000 + $14,000 + $420,000 + $32,000)]. The other shared costs will have to be absorbed by the two remaining product lines. The segmented income statement for a retail company with three product lines is presented below:

The company buys the goods in the three product lines directly from manufacturers' representatives. Each product line is directed by a manager whose salary is included in the administrative expenses. Administrative expenses are allocated to the three product lines equally because the administration is spread evenly among the three product lines.
Salaries represent payments to the workers in each product line and therefore are traceable costs of each product line. Advertising promotes the entire company rather than the individual product lines. As a result, the advertising is allocated to the three product lines in proportion to the sales revenue. Commissions are paid to the salespersons in each product line based on 2% of gross sales. Rent represents the cost of the retail store and warehouse under a lease agreement with 5 years remaining. The product lines share the retail and warehouse space, and the rent is allocated to the three product lines based on the square footage occupied by each of the product lines.

A deterministic approach assumes that a value is known with certainty. If that value is deemed to be the most likely outcome, assumed demand will be 5,000 pretzels,

The volume with the highest probability 35%). A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather i= hot, it will make US $2,600; if the weather is cold, the profit will be US $1,000. If the stand sells coffee and the weather is hot, it will make US $1,900: if the weather is cold, the profit will be US $2,000. The probability of cold weather on a given day at this time is 60%.

The maturity stage is the ideal time for advertising lower prices and superior quality because this is the period during a product's life when competition is greatest. Due to the availability of many alternatives or substitutes, a firm has reasons to set itself apart. Because price and quality are both concerns of customers during the maturity stage, it is ideal for the firm to differentiate its product by advertising low prices and higher quality.

End-user developed applications may not be subject to an independent outside review by systems analysts and are not created in the context of a formal development methodology. These applications may lack appropriate standards, controls, quality assurance procedures, and documentation. A risk of end-user applications is that management may rely on them as much as traditional applications.