A company is able to implement one of two strategies regarding a particular prod

Question

A company is able to implement one of two strategies regarding a particular product hire a marketing firm to increase sales 15% or assign a product procurement manager who can reduce material cost for the product by 4%. Currently, the product has sales of $9,800,000. The costs of materials are $6,300,000, labor costs are $1,350,000, and overhead costs are $750,000. What are the effects on net income of the two alternative strategies? The change in net income after the 15% increase in sales is $1. (Enter your response as a whole number.) The change in net income due to the reduction in material costs is $(Enter your response as a whole number) Based on the change in net income, the company should

Explanation / Answer

Net Income = Sales - Cost of material - Labor cost - Overhead cost

Current Net Income = 9,800,000 - 6,300,000 - 1,350,000 - 750,000 = 1,400,000

a) Net change in Income after 15% increase in sales = 9,800,000*15% = 1,470,000

b) Net change in Income due to cost reduction in material by 4% = 6,300,000*4% = 252,000

c) Hire a marketing firm as the net income change is higher

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.