C 5. As noted in C 3, Datura, Ltd., sold 15,000 sets of pottery in 2010. As noted in C 4, in 2011, Datura’s strategic planning team targeted sales of 15,000 sets of pottery, reduced the selling price to €890 per set, increased sales commissions to 12 percent of the selling price, and decreased fixed distribution costs by 10 percent and variable distribution costs by 4 percent. It was assumed that all other costs would stay the same.

Based on an analysis of these changes, Sophia Callas, Datura’s president, is concerned that the proposed strategic plan will not meet her goal of increasing Datura’s operating income by 10 percent over last year’s income and that the operating income will be less than last year’s income. She has come to you for spreadsheet analysis of the proposed strategic plan and for analysis of a special order she just received from an Australian distributor for 4,500 sets of pottery.

The order’s selling price, variable purchases cost per unit, sales commission, and total fixed costs will be the same as for the rest of the business, but the variable distribution costs will be €160 per unit.

Using an Excel spreadsheet, complete the following tasks:

1. Calculate the targeted operating income for 2011 using just the proposed strategic plan.

2. Prepare a budgeted contribution margin income statement for 2011 based on just the strategic plan. Do you agree with Datura’s president that the company’s projected operating income for 2011 will be less than the operating income for 2010? Explain your answer.

3. Calculate the total contribution margin from the Australian sales.

4. Prepare a revised budgeted contribution margin income statement for 2011 that includes the Australian order. (Hint: Combine the information from 2 and 3 above.)

5. Does Datura need the Australian sales to achieve its targeted operating income for 2011?

Cookie Company (Continuing Case)