products selling price per unit were $12, its variable costs were $8, and its ad
ID: 2571480 • Letter: P
Question
products selling price per unit were $12, its variable costs were $8, and its advertising costs were the same as for product A, how many units of the new product would the company have to sell to make the switch from product A to the new product worthwhile? 8-30 Dropping a product line (CMA adapted) (LO 5) Ridley and Scott Mercan- tile operates two stores, one on Maple Avenue and the other on Fenner Road. Results for the month of May, which is representative of all months, are as follows Maple Avenue Fenner Road Store Store Total $200,000 116,000 84,000 60,000 10,000 70,000 S 14,000 $120,000 Sales revenue Variable expenses Contribution margin Direct fixed expenses Common fixed expenses $80,000 3200 48,000 20,000 4,000 24,000 $24,000 84,000 36,000 40,000 6,000 46,000 $ (10,000) Total fixed expenses Operating income The following information pertains to Ridley and Scott's operation . One-fourth of each store's direct fixed expenses would continue if either store were cl osed Ridley and Scott allocates common fixed expenses to each store on the basis of sales dollars Management estimates that closing the Fenner Road store would result in a 10% decrease in the Maple Avenue store's sales, while closing the Maple Avenue store would have no effect on the Fenner Road store's sales. * Required Management believes that the Fenner Road store should be closed, since it is operating a loss. Do you support management's belief? Why or why not? b. Should management consider closing the Maple Avenue store rather than the Fenner Road store? Why or why not? c. Ridley and Scott are considering a special promotiona They expect a $6,000 monthly increase in advertising expenses to generate a 10% increase in the store's sales volume. The campaign would not affect sales at the Maple Avenue store. What effect would the promotion have on Ridley and Scott's monthly income? Should the campaign be implemented? Why or why not? Ignore your answers to parts (a) and (b). d. Half of the Fenner Road store's dollar sales come from items that are sold at variable cost to attract customers to the store. Managers are considering deleting tho items from the product mix. Doing so would reduce the Fenner Road store's direct fixed expenses by 15% but would also reduce the remaining sales volume result by an additional 20%. There would be no effect on the Maple Avenue store. Should management implement this change in the product mix? Why or why not? se C&C; SPORTS CONTINUING CASEExplanation / Answer
A. No i do not Support management decision of closing Fenner Road store would also result in incurring of Direct Fixed Expenses of 10,000 and apart from that it would lower sales of Maple Avenue Store by 10% which in turn would result in loss of profit of 2400 (8000*30% (Profit)). Hence closing of fenner road store would result in loss of 12400 which is more by 2400 when it is running.
B. No Management should not think of closing Mapple Avenue Store since it is profitable unit and closing of same would in result in to overall loss of 15000 which at present is profit of 14000.
C. Campaign should not be implemented since it would increase loss by 2400 (3600 (12000*30%) profit in 10% increase in sales - 6000 campaign advertisement expense)
D. Management should not implement this since it would result in increase in loss to 11200 instead of 10000 at present. Below is working for the same.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.