Question
Consider the following data for Jasmine & Aladdin Carpets Inc. Per Unit Percent Sales Price $500 100 Less: variable costs 300 60 Contribution margin 200
Consider the following data for Jasmine & Aladdin Carpets Inc. Per Unit Percent Sales Price $500 100 Less: variable costs 300 60 Contribution margin 200 40 Fixed costs $70,000 Currently sales are $200,000 (400 units). Required: The following 3 situations are independent of one another. ALL CALCULATIONS MUST BE SHOWN 1. The sales manager feels that an increase of $20,000 in fixed costs will increase sales by 15%. Should the change be made? 2. Management is considering increasing the quality of its carpets at an additional cost of $20 per carpet. They feel that this will increase sales by 160 carpets. Should Aladdin increase the quality of their carpets? 3. The workforce has approached Aladdin to change them from a flat salary of $12,000 per month to a sales commission of $30 per carpet which could increase sales by 15%. Should Aladdin agree with their proposal?
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