Love Designs, an interior design company, has experienced a drop in business due

Question

Love 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, Love 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

$16,500

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

$2,800

Depreciation of company cars

9,000

191,800

Net income

$9,200

Required:

Calculate the impact of the exhibit on company profit.

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

Hi,

Please find the detailed answer as follows:

Change in Revenue = 36000

Less

Change in Design Supplies = 16500/201000*237000 = 19455.22 - 16500 = 2955.22

Change in Travel Expenses = 2800/201000*237000 = 3301.49 - 2800 = 501.49

Cost of Exhibit = 12000

Net Change in Income = 36000 - 2955.22 - 501.49 - 12000 = 20543.29

Answer is 20543.29 or 20543.

Thanks.

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