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Regal Flair Enterprises has two product lines-jewelry and women's apparel. Cost and revenue data for each product line for the current month are as follows. decide which product line to adve Product Lines Jewelry Apparel $900,000 $400,000 Sales 40% 30% Variable costs as a percentage of sales $225,000 $240,000 Fixed costs traceable to product lines In addition to the costs shown, the company incurs monthly fixed costs of $130,000 common to both product lines. Instructions a. Prepare Regal Flair Enterprises's responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns showing all dollar amounts as percentages of sales. b. Assume that a marketing survey shows that a $80,000 monthly advertising campaign focused on either product line should increase that product line's monthly sales by approximately $120,000. Do you recommend this additional advertising for either or both product lines? Show computations to support your conclusions. c. Management is considering expanding one of the company's two product lines. An invest- ment of a given dollar amount is expected to increase the sales of the expanded product line by $300,000. It is also expected to increase the traceable fixed costs of the expanded product line by 70 percent. On the basis of this information, which product line do you recommend expanding? Explain the basis for your conclusion.

Regal Flair Enterprises has two product lines-jewelry and women's apparel. Cost and revenue data for each product line for the current month are as follows. decide which product line to adve Product Lines Jewelry Apparel $900,000 $400,000 Sales 40% 30% Variable costs as a percentage of sales $225,000 $240,000 Fixed costs traceable to product lines In addition to the costs shown, the company incurs monthly fixed costs of $130,000 common to both product lines. Instructions a. Prepare Regal Flair Enterprises's responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns showing all dollar amounts as percentages of sales. b. Assume that a marketing survey shows that a $80,000 monthly advertising campaign focused on either product line should increase that product line's monthly sales by approximately $120,000. Do you recommend this additional advertising for either or both product lines? Show computations to support your conclusions. c. Management is considering expanding one of the company's two product lines. An invest- ment of a given dollar amount is expected to increase the sales of the expanded product line by $300,000. It is also expected to increase the traceable fixed costs of the expanded product line by 70 percent. On the basis of this information, which product line do you recommend expanding? Explain the basis for your conclusion.

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 46E: Lotts Company produces and sells one product. The selling price is 10, and the unit variable cost is...
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decide which product line to advertise? L022-4, LO22-5 M 22.2A data for each product line for the current month are as follows. Product Lines g and Using pility Income Is Jewelry Apparel $900,000 $400,000 Sales ... Variable costs as a percentage of sales . 40% 30% Fixed costs traceable to product lines $225,000 $240,000 In addition to the costs shown, the company incurs monthly fixed costs of $130,000 common to both product lines. Instructions a. Prepare Regal Flair Enterprises's responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns showing all dollar amounts as percentages of sales. b. Assume that a marketing survey shows that a $80,000 monthly advertising campaign focused on either product line should increase that product line's monthly sales by approximately $120,000. Do you recommend this additional advertising for either or both product lines? Show computations to support your conclusions. c. Management is considering expanding one of the company's two product lines. An invest- ment of a given dollar amount is expected to increase the sales of the expanded product line by $300,000. It is also expected to increase the traceable fixed costs of the expanded product line by 70 percent. On the basis of this information, which product line do you recommend expanding? Explain the basis for your conclusion.
Transcribed Image Text:decide which product line to advertise? L022-4, LO22-5 M 22.2A data for each product line for the current month are as follows. Product Lines g and Using pility Income Is Jewelry Apparel $900,000 $400,000 Sales ... Variable costs as a percentage of sales . 40% 30% Fixed costs traceable to product lines $225,000 $240,000 In addition to the costs shown, the company incurs monthly fixed costs of $130,000 common to both product lines. Instructions a. Prepare Regal Flair Enterprises's responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns showing all dollar amounts as percentages of sales. b. Assume that a marketing survey shows that a $80,000 monthly advertising campaign focused on either product line should increase that product line's monthly sales by approximately $120,000. Do you recommend this additional advertising for either or both product lines? Show computations to support your conclusions. c. Management is considering expanding one of the company's two product lines. An invest- ment of a given dollar amount is expected to increase the sales of the expanded product line by $300,000. It is also expected to increase the traceable fixed costs of the expanded product line by 70 percent. On the basis of this information, which product line do you recommend expanding? Explain the basis for your conclusion.
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