Differential Analysis for Sales Promotion Proposal

Sole Mates Inc. is planning a one-month campaign for July to promote sales of one of its two shoe products. A total of $100,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:

		Tennis Shoe			Walking Shoe
Unit selling price			$85			$100
Unit production costs:
	Direct materials		$19			$32
	Direct labor		8			12
	Variable factory overhead		7			5
	Fixed factory overhead		16			11
	Total unit production costs		$50			$60
Unit variable selling expenses			6			10
Unit fixed selling expenses			20			15
	Total unit costs		$76			$85
Operating income per unit			$9			$15

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 7,000 additional units of tennis shoes or 7,000 additional units of walking shoes could be sold without changing the unit selling price of either product.

Required:

1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate subtracted amounts, negative amounts, or a loss.

Differential Analysis
Promote Tennis Shoe (Alt. 1) or Promote Walking Shoe (Alt. 2)
June 19
	Promote Tennis Shoe (Alternative 1)	Promote Walking Shoe (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs:
Direct materials
Direct labor
Variable factory overhead
Variable selling expenses
Sales promotion
Income (Loss)	$	$	$