Original Data : Feather Friends, Inc., distributes a high-quality wooden birdhou

Question

Original Data : Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $16 per unit. Variable costs are $8.00 per unit, and fixed costs total $163,000 per year.

Refer to the original data. Assume that the company sold 31,000 units last year. The sales manager is convinced that a 15% reduction in the selling price, combined with a $77,000 increase in advertising, would cause annual sales in units to increase by one-third.

Prepare two contribution format income statements, one showing the results of last year's operations and one showing the results of operations if these changes are made. (Round your per unit values to 2 decimal places and other answers to the nearest dollar amount. Omit the "$" sign in your response.)

  

  

  

  

$   

$  

$   

$   

Refer to the original data. Assume again that the company sold 31,000 units last year. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.1 per unit. He thinks that this move, combined with some increase in advertising, would increase annual sales by 35%. By how much could advertising be increased with profits remaining unchanged? (Negative amount should be indicated by a minus sign. Do not prepare an income statement; use the incremental analysis approach. Omit the "$" sign in your response.)

    

Original Data : Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $16 per unit. Variable costs are $8.00 per unit, and fixed costs total $163,000 per year.

Explanation / Answer

5.a)

6)

Originally
496000 (31,000 x $16) Sales
- 248,000 (31,000 x $8) Variable Costs
- 163,000 Fixed Costs
= $85,000 Profit

With Changes:
669600(496000 x 135%) Sales
- 422685 (31,000 x $10.1 x 135%) Variable Costs
- ? Fixed Costs
= $85000 Profit

669600 - 422685 - Fixed Costs = 85000
Fixed Costs = 163,000

161915 - 163,000 = -1085 increase in advertising (or) $1085 decrease in advertising

                                                           





Last year

Projected

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