Alberta Gauge Company, Ltd., a small manufacturing company in Calgary, Alberta, manufactures three types of electrical gauges used in a variety of machinery. For many years the company has been profitable and has operated at capacity. However, in the last two years, prices on all gauges were reduced and selling expenses increased to meet competition and keep the plant operating at capacity. Second-quarter results for the current year, which follow, typify recent experience.

JoAnn Brower says that Alberta Gauge Company's product-line income statement for the second quarter is not suitable for analyzing proposals and making decisions such as the ones suggested by Alice Carlo. Write a memo to Alberta Gauge's president that addresses the following points.

a. Explain why the product-line...