The formula and answer for this problem is below, can someone show me how each o

Question

The formula and answer for this problem is below, can someone show me how each of the calculations were identified? I'm having problems getting to the correct answer.

Infinity Designs, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Home and Garden Expo. The exhibit will cost the company $12,000 for space. At the show, Infinity Designs will present a slide show on a PC, pass out brochures that are printed previously, (the company printed more than needed), and show its portfolio of previous

jobs.

The company estimates that revenue will increase by $36,000 over the next year as a result of the exhibit. For the previous year, profit was as follows:

Revenue

$201,000

Less:

Design supplies (variable cost)

$15,500

Salary of Samantha Spade (owner)

80,000

Salary of Kim Bridesdale (full time employee)

55,000

Rent

18,000

Utilities

6,000

Depreciation of office equipment

3,600

Printing of advertising materials

700

Advertising in Middleton Journal

2,500

Travel expenses other than depreciation of autos (variable cost)

$3,000

Depreciation of company cars

9,000

Required:

Calculate the impact of the exhibit on company profit.

Correct Answer: (20,686.57)

Supplies as a percentage of Revenue = Supplies/Total Revenue

Travel as a percentage of Revenue = Travel/Total Revenue

Now:

Increase in Revenue MINUS

    Cost of Exhibit Space

    Increase in Supplies (Increase * Supply Percentage)

    Increase in Travel (increase * Travel Percentage)

= Increase in Profit

The formula and answer for this problem is below, can someone show me how each of the calculations were identified? I'm having problems getting to the correct answer.

Infinity Designs, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Home and Garden Expo. The exhibit will cost the company $12,000 for space. At the show, Infinity Designs will present a slide show on a PC, pass out brochures that are printed previously, (the company printed more than needed), and show its portfolio of previous

jobs.

The company estimates that revenue will increase by $36,000 over the next year as a result of the exhibit. For the previous year, profit was as follows:

Explanation / Answer

supplies as a % of revenue= 15500/201000=.077114 or 7.71144%

Travel expense as a % of revenue = 3000/201000=.014925 or 1.49254%

all other cost are fixed thus irrelevant

Increase in revenue 36000 less:     Cost of Exhibit Space (12000) Increase in Supplies [36000*.0771144) (2776.12) Increase in Travel [36000*1.49254%) (537.31) Incremental profit 20686.57

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