D. Determine the expected operating income under each proposed sales and marketing plan. (10 marks)

PartB Active Sports manufactures custom club soccer uniforms (jerseys, thorts, socks and jackets) and supplies local Adelaide clubs and their teams each season. Active Sports focuses on quick delivery and fast customer response time. Recently, Active Sports has experienced a decrease in available cash and an increase in imventory. Sves revenue has been increasing at afaster rate than expenses, generating a higher level of profits. Approximately half of Active's asset base is financed through debt and half through equity. The industry faces increasing pressure from imports, particularly from China, which creates a need to compete on price. However, curtomers in this market are willing to pay a higher price for goods that are durable and of high quality. The internet is becoming an increatingly important rales channel and source of competition at the same time. The company, which started out as Active Uniforms, was founded in 1962 by the Hellas family and began its operations manufacturing work uniforms for local factory workers in South Australia As manufacturing declined in the local economy, the famly began to look for a market niche to guide the company's future growth. Recognizing the increas ing number of youth participating in organized sports, and the projected growth in popularity of soccer in Australia, the family decided to focus on the marnufacture of custom soccer uniforms. The family has made a conscious decision not to follow the textile industry's trend of transferr ing manufacturing operations to China and other foreign countries that offer cheap labor. They have chosen to remain a domestic producer and to focus on quick delivery and fast curtomer response within the local market. The company manufactures and supplies three main products in a typical soccer kit! custom soccer jersoys (topt), cuttom soccer shorts and soccer socks. Sports-Strength - part of the supplv chain ofActive Sports Active Sports is part of a supply chain whereby they source fabrics and other raw materials from their cuppliers, and they in turn also use retail outiets such as 'Sports-Strength' to take curtomer orders and supply custom soccer uniform items on behalf of the manufactures. Martin Cole, senior sales director at Sports-Strength, was reviewing the latest corporate income statement prior to meeting with the company's chief finuncial officer. 'I dor't understund these numbers", Martin thought. "We fell short of our projected sales volume of Sports-Strength - part of the suppiy chain of Active Sports Active Sports is part of a supply chain whereby they source fabrics and other raw materials from their suppliers, and they in turn also use retail outlets such as 'Sports-Strength' to take customer orders and supply custom soccer uniform items on behalf of the manufacturer. Martin Cole, senior sales director at Sports-Strength, was reviewing the latest corporate income statement prior to meeting with the company's chief financial officer. 'I don't understand these numbers", Martin thought. "We fell short of our projected sales volume of jerseys by 16%, so I was anticipating net income to be 16% lower than expected as well. But that's not what the numbers are showing. How can luse this information to help me plan for the coming year? The company had been preparing absorption costing income statements, which it used for esternal reporting To shed some light on the situation, the new internal accountant prepared an additional income statement using variable costing - a contribution format income statement for the year. B292 TMA (Nummer 2022-2023) For simplicity, assume that Sports.Strength sell only one product, soccer jerseys. SportsStrength buys each jersey from Active Sports for $14.80 and sells it for $20. Sports- Strength pays a fised wage and 6% commission to sales staff. Sports-Strength has just recelved notice from Active Sports that the price of a soccer jersey will be increasing to $15.30 nest year. In response to this increase, Sports Strength is plarning its sales and marketing campaign for the coming year, Managers have developed two possible plans and have asked you to evaluate them. The first plan (A) calls for passing on the entire 5050 cost increase to customers through an increase in the sales price. Managers believe that $15,000 in additional advertising targeted directly at current customers will allow the sales force to reach the current year's sales volume of 51,975 jerroys. D. Determine the expected operating income under each proposed sales and marketing plan. (10 marks) The sccond plan (B) relies on a new advertising campalgn that focuses on the sales price remaining the same as last year. The campaign would include a new database that offers more potentfal customers than Sports-Strength has had access to in the past. The cost of the campalgn is expected to be \$10,000. Managers believe that the campaipn wal be more successfol in genorating new zales than the current incentive-based sales and marketing plan As a result, they want to reduce the sales commission from 696 to 4% of sales and increase sales saliules by $22,000, The campaign is expected to generate an additional 16% in sales volume