A company has two product lines, shoes and hats. Costand revenue for each line f

Question

A company has two product lines, shoes and hats. Costand revenue for each line for the current month follows:                                                                          Product lines                                                                         shoes          hats sales......................................                       $ 800,000       $450,000 variable costs as a percentage ossales........           55%            28% fixed costs traceable to productlines.........      $200,000      $ 250,000 The company incurs monthly fixed costs of $ 100,000 common toboth product lines. ** assume that a marketing survey shows that a $75,00 monthlyadvertising campaign focused on either product line should increasethat product line's monthly slaes by apprpx. $150,000. Do yourecommend this additional advertising for either or both productlines? Show computations. A company has two product lines, shoes and hats. Costand revenue for each line for the current month follows:                                                                          Product lines                                                                         shoes          hats sales......................................                       $ 800,000       $450,000 variable costs as a percentage ossales........           55%            28% fixed costs traceable to productlines.........      $200,000      $ 250,000 The company incurs monthly fixed costs of $ 100,000 common toboth product lines. ** assume that a marketing survey shows that a $75,00 monthlyadvertising campaign focused on either product line should increasethat product line's monthly slaes by apprpx. $150,000. Do yourecommend this additional advertising for either or both productlines? Show computations.

Explanation / Answer

Assume that a marketing survey shows that a$75,00 monthly advertising campaign focused on either product lineshould increase that product line's monthly slaes by apprpx.$150,000. Do you recommend this additional advertising foreither or both product lines? Show computations ==================================================================================                                                                   Shoes                               Hats                                                       Dollars      Percent            Dollar         Percent         Sales                                             950,000        100             600,000           100           Variablecosts                                522,500          55             168,000             28                                                   _________                        _______                       ContributionMargin                        427,500         45              432,000            72 Traceable Fixedcosts                     275,000         30              325,000            54                                                   _________                     _________                ResponsibilityMargin                     152,500        15              107,000           13        Deceasedby   (Not Recommended)  7,500                             
Increasedby   (107,000 - 74,000)                                           33,000                      Recommended ___________________________________________________________________________________________

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