Current Attempt in Progress "Ill never understand this accounting stuff Blake Dunn yelled, waving the income statement he had just received from his accountant in the morning mail. "Last month, we sold 2,000 stuffed State University mascots and earned $6,565 in operating income. This month, when we sold 3,000 I thought we'd make $9,848. But this income statement shows an operating income of $11.615! How can I ever make plans if I can't predict my income? I'm going to give Janice one last chance to explain this to me," he declared as he picked up the phone to call Janice Miller, his accountant. "Will you try to explain this operating income thing to me one more time?" Blake asked Janice. "After I saw last month's income statement, I thought each mascot we sold generated $3.28 in net income, now this month, each one generates $3.87! There was no change in the cost we paid for each mascot, so I don't understand how this happened. If I had known I was going to have $11,615 in operating income, I would have looked more seriously at adding to our product line." Taking a deep breath, Janice replied, "Sure, Blake. I'd be happy to explain how you made so much more operating income than you were expecting Using the following income statements, prepare a contribution margin income statement for March. (Round to 2 decimal places, e.g. 52.75.) Sales revenue Cost of goods sold Gross profit Rent expense Wages expense Shipping expense Utilities expense Advertising expense Insurance expense Operating income February $25,000 10,000 15,000 1,500 3,500 1,100 750 1,000 585 $6,565 March $37,500 15,000 22.500 1,500 5,000 1,650 750 1,400 585 $11,615 Total Per unit 37500 $ Sales 12.5 Question 2 of 4 Total Per unit Sales 37500 $ 12.5 Variable expenses Cost of goods sold 15000 5 Shipping 1650 55 Advertising 1200 Wages 4500 15 Total variable expenses - 22350 7.45 Contribution margin 15150 $ 5.05 Fixed expenses Insurance 585 Rent 1500 Utilities 750 Wages 500 200 Advertising Total fixed expenses 3535 Operating income 11615 e Textbook and Media Attempt Blake is evaluating two options to increase the number of mascots sold next month. First, he believes he can increase sales by advertising in the university newspaper. Blake can purchase a package of 12 ads over the next month for a total of $1,500. He believes the ads will increase the number of stuffed mascots sold from 1,500 to 2.200. A second option would be to reduce the selling price. Blake believes a 15% decrease in the price will result in 2,400 mascots sold. Calculate the operating income for each options? (Round per unit to 2 decimal places and final answers to decimal places, e.g. 5,275.) Operating Income Option 1 $ Option 2 $ Which plan should Blake implement? At what level of sales would he be indifferent between the two plans? (Round per unit to 2 decimal places and final answer to 0 decimal places, e.g. 5,275.) mascots eTextbook and Media
