Creative Landscaping wishes to increase their market share. They are looking int

ID: 2530095 • Letter: C

Question

Creative Landscaping wishes to increase their market share. They are looking into exhibiting at the Home and Garden Show in May. The cost of exhibit space is $25,000. Creative Landscaping will use leftover brochures from previous trade shows. They will not incur any additional labor expenses to participate in the exhibit. They will, however, have transportation costs of $750 to transport goods to and from the exhibit. Resources indicate they can expect a $60,000 increase in revenues next year as a result of the exhibit. Profit for the prior year was as follows: Revenue $ 389,500 Less: Landscaping Supplies $ 64,950 Owner's salaries 147,000 Sales staff salaries (full time) 85,800 Rent 26,800 Utilities 7,900 Depreciation of office equipment 5,800 Depreciation of landscaping equipment 6,400 Depreciation of vehicles 3,900 Advertising and Promotion costs 6,200 354,750 Net Income $ 34,750 What is the incremental profit or loss from exhibiting at the show? Incremental Revenues: Incremental Costs: Should they exhibit at the show, why or why not? Creative Landscaping wishes to increase their market share. They are looking into exhibiting at the Home and Garden Show in May. The cost of exhibit space is $25,000. Creative Landscaping will use leftover brochures from previous trade shows. They will not incur any additional labor expenses to participate in the exhibit. They will, however, have transportation costs of $750 to transport goods to and from the exhibit. Resources indicate they can expect a $60,000 increase in revenues next year as a result of the exhibit. Profit for the prior year was as follows: Revenue $ 389,500 Less: Landscaping Supplies $ 64,950 Owner's salaries 147,000 Sales staff salaries (full time) 85,800 Rent 26,800 Utilities 7,900 Depreciation of office equipment 5,800 Depreciation of landscaping equipment 6,400 Depreciation of vehicles 3,900 Advertising and Promotion costs 6,200 354,750 Net Income $ 34,750 What is the incremental profit or loss from exhibiting at the show? Incremental Revenues: Incremental Costs: Should they exhibit at the show, why or why not?

Explanation / Answer

Answers

Incremental Revenues:

Expected increase in revenue

$ 60,000.00

Incremental Cost:

Cost of exhibit space

$ 25,000.00

Transportation cost

$ 750.00

$ 25,750.00

Net benefit / Incremental Benefit

$ 34,250.00

YES, the should exhibit at the show BECAUSE there is an incremental benefit of $34,250 in doing so.