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 $100,000 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: No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 7,000 additional units of tennis shoes or 7,000 additional units of walking shoes could be sold without changing the unit selling price of either product. Instructions 1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). 2. The sales manager had tentatively decided to promote walking shoes, estimating that operating income would be increased by $5,000 ($15 operating income per unit for 7,000 units, less promotion expenses of $100,000). The manager also believed that the selection of tennis shoes would reduce operating income by $37,000 ($9 operating income per unit for 7,000 units, less promotion expenses of $100,000). State briefly your reasons for supporting or opposing the tentative decision.

BuyFind

Managerial Accounting

15th Edition
Carl Warren + 1 other
Publisher: South-Western College Pub
ISBN: 9781337912020
BuyFind

Managerial Accounting

15th Edition
Carl Warren + 1 other
Publisher: South-Western College Pub
ISBN: 9781337912020

Solutions

Chapter
Section
Chapter 11, Problem 3PB
Textbook Problem

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 $100,000 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:

Chapter 11, Problem 3PB, Differential analysis for sales promotion proposal Sole Mates Inc. is planning a one-month campaign

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 7,000 additional units of tennis shoes or 7,000 additional units of walking shoes could be sold without changing the unit selling price of either product.

Instructions

  1. 1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2).
  2. 2. The sales manager had tentatively decided to promote walking shoes, estimating that operating income would be increased by $5,000 ($15 operating income per unit for 7,000 units, less promotion expenses of $100,000). The manager also believed that the selection of tennis shoes would reduce operating income by $37,000 ($9 operating income per unit for 7,000 units, less promotion expenses of $100,000). State briefly your reasons for supporting or opposing the tentative decision.

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Chapter 11 Solutions

Managerial Accounting
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