Differential Analysis Report for Sales Promotion Proposal
Rocket Shoe Company is planning a one-month campaign for August to promote sales of one of its two shoe products. A total of $67,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign.
Cross-Trainer Shoe |
Running Shoe |
|||
Unit selling price | $41 | $45 | ||
Unit production costs: | ||||
Direct materials | $ (8) | $(10) | ||
Direct labor | (3) | (3) | ||
Variable factory overhead | (2) | (3) | ||
Fixed factory overhead | (3) | (4) | ||
Total unit production costs | $(16) | $(20) | ||
Unit variable selling expenses | (13) | (12) | ||
Unit fixed selling expenses | (8) | (4) | ||
Total unit costs | $(37) | $(36) | ||
Operating income per unit | $ 4 | $ 9 |
No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 24,000 additional units of cross-trainer shoes or 20,000 additional units of running shoes could be sold without changing the unit selling price of either product.
Required:
1. Prepare a differential analysis report presenting the additional revenue and additional costs anticipated from the promotion of cross-trainer shoes and running shoes.
Rocket Shoe Company | ||
Proposals for Sales Promotion Campaign | ||
Differential Analysis Report | ||
Cross-Trainer Shoes | Running Shoe | |
Differential revenue from proposals | $ | $ |
Differential cost of proposals: | ||
$ | $ | |
Differential cost of proposals | $ | $ |
$ | $ |
2. The sales manager had tentatively decided to
promote cross-trainer shoes, estimating that operating income would
be increased by $113,000 ($9 operating income per unit for 20,000
units, less promotion expenses of $67,000). The manager also
believes that the selection of running shoes will decrease
operating income by $29,000 ($4 operating income per unit for
24,000 units, less promotion expenses of $67,000). Should the sales
manager’s tentative decision be accepted or opposed?
The sales manager’s tentative decision should be .
The will contribute more to operating income than
would be contributed by promoting the .
No additional fixed costs will be incurred on increased output as no increase in facilities is required | ||
Cross Trainer Shoes | Running Shoe | |
Differential Revenue | 984,000 | 900,000 |
Differential costs: | ||
Direct Material | (192,000) | (200,000) |
Direct labor | (72,000) | (60,000) |
Variable factory overhead | (48,000) | (60,000) |
Variable selling expense | (312,000) | (240,000) |
Differential costs | (624,000) | (560,000) |
Contribution Margin from proposal | 360,000 | 340,000 |
Should not be accepted | ||
Cross trainer would contribute more than running shoe as contribution margin is higher |
Please note that the type of shoe is wrongly mentioned in part 2. Please check the data. The assertion of manager is wrong, It should be opposite
Differential Analysis Report for Sales Promotion Proposal Rocket Shoe Company is planning a one-month campaign for...
Differential Analysis for Sales Promotion Proposal Sole Mates Inc. is planning a one-month campaign for July to promote sales of one of its two shoe products. A total of $123,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign: Tennis Shoes Walking Shoes Unit selling price $66 $73 Unit production costs: Direct materials $12 $16 Direct...
Differential Analysis for Sales Promotion Proposal Kankakee Cosmetics Company is planning a one-month campaign for December to promote sales of one of its two cosmetics products. A total of $150,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign: Moisturizer Perfume Unit selling price $35 $55 Unit production costs: Direct materials $(12) $(20) Direct labor (8)...
September to promote sales of one... Parisian Cosmetics Company is planning a one-month campaign for September to promote sales of one of its two cosmetics products. A total of $140,000 has been budgeted for advertising contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign: Moisturizer Perfume Unit selling proce $55 $60 Unit production costs: Direct materials $9 $14 Direct labor 3...
Kankakee Cosmetics Company is planning a one-month campaign for December to promote sales of one of its two cosmetics products. A total of $139,491 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign: 1 Moisturizer Perfume 2 Unit selling price $55.36 $59.58 3 Unit production costs: 4 Direct materials $9.08 $13.92 5 Direct labor 3.08 4.92...
Chapter 10 Differential Analysis and Product Pricing 514 docted for advent ts. A total of activities. The following det nons, and other prosiding which of the products to see ✓ 1. Moisturizer differential revenue $250,000 PR 10-3A Differential analysis for sales promotion proposal Kankakee Cosmetics Company is planning a one-month campaign for Decen sales of one of its two cosmetics products. A total of $150,000 has been bude ing, contests, redeemable coupons, and other promotional activities. The follow been assembled...
Vertical Analysis of Income Statement For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $21,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement: Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 2041 20Y2 20Y1 $746,000 $642,000 Sales Cost of goods sold Gross profit 350,620 333,840 $395,380 $308,160 Selling expenses $156,660 $128,400 82,060 83,460 Administrative expenses...
Vertical Analysis for Income Statement For 20Y6, Fishing Experiences Inc. initiated a sales promotion campaign that included the expenditure of an additional $19,000 for advertising. At the end of the year, Colt Schultz, the president, is presented with the following condensed comparative income statement: FISHING EXPERIENCES INC. Comparative Income Statement For the Years Ended December 31, 20Y6 and 20Y5 20Y6 20Y5 Sales $695,000 $598,000 Cost of goods sold (326,650) (328,900) Gross profit $ 368,350 $ 269,100 Selling expenses (152,900) (119,600)...
For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $18,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement: Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $627,000 $539,000 Cost of goods sold 288,420 269,500 Gross profit $338,580 $269,500 Selling expenses $125,400 $102,410 Administrative expenses 68,970 70,070 Total operating expenses $194,370 $172,480...
Sales ........ For 2016, Indigo Company initiated a sales promotion campaign that included the expenditure of an additional $39,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement: Indigo Company Comparative Income Statement For the Years Ended December 31, 2016 and 2015 2016 2015 Sales $820,000 $600,000 Cost of goods sold............ 311,600 240,000 Gross profit ............... $508,400 $360,000 Selling expenses ............... $164,000 $108,000 Administrative expenses......... 57,400 54,000 Total...
Differential Analysis Report for a Discontinued Product The condensed product-line income statement for Dinner Ware Company is as follows: DINNER WARE COMPANY Product-Line Income Statement Bowls Plates Cups Sales $1,500,000 $2,350,000 $975,000 (900,000) Cost of goods sold Gross profit (1,400,000) $950,000 (700,000) $250,000 $600,000 (270,000) $330,000 (780,000) $195,000 (300,000) $(105,000) Selling and administrative expenses Operating income (loss) Fixed costs are 40% of the cost of goods sold and 18% of the selling and administrative expenses. Dinner Ware assumes that fixed...