Question

Smith Company sells both designer and moderately priced fashion accessories. Top management is deciding which product line to emphasize. Accountants have provided the following data: E(Click the icon to view the data.) Prepare an analysis to show which product the company should emphasize. (Enter the units displayed per square foot and the contribution margin per square foot to two decimal places.) Data Table Product Designer Moderately Priced Units displayed per square foot: Per Item Designer Moderately Moderately priced Designer Priced Contribution margin per unit X X 195 $ $ Average sale price 82 Contribution margin per square foot of display space 105 20 Average variable costs Capacity-Square feet of display space х X Average contribution margin 90 62 Total contribution margin at capacity 25 15 Average fixed costs (allocated) 65 $ $ 47 Average operating income The Smith Company store in Grand Junction, Colorado, has 14,000 square feet of floor space. If Smith Company emphasizes moderately priced goods, it can display 980 items in the store. If Smith Company emphasizes designer wear, it can only display 420 designer items. These numbers are also the average monthly sales in units. Enter any number in the edit fields and then click Check Answer. ?

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

Answer e Part 1) Product Moderately Period Designer 0.03 5 Units displayed per square foot 5 Designer - Moderately Priced Contribution margin per unit Contribution Margin per square foot of display space 0 CapacitySquare feet of display space 1 Total contribution margin at capacity 65 1.95 14000 27300 0.07 47 3.29 14000 46060 $ 125,000 3 Part 2) 4 Expected decrease in revenues 5 Expected decrease in costs 6 Variable costs 7 Fixed costs 8 Expected decrease in total costs 9 Expected Increase in operating income $ $ 100,000 45,000 145,000 20,000 $