Differential Analysis Report for Sales Promotion Proposal

Wedge Shoe Company is planning a one-month campaign for August to promote sales of one of its two shoe products. A total of $118,000 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.

	Closed-Toe Shoe		Open-Toe Shoe
Unit selling price	$62		$68
Unit production costs:
Direct materials	$ (11)		$(15)
Direct labor	(4)		(5)
Variable factory overhead	(3)		(4)
Fixed factory overhead	(6)		(7)
Total unit production costs	$(24)		$(31)
Unit variable selling expenses	(20)		(19)
Unit fixed selling expenses	(11)		(7)
Total unit costs	$(55)		$(57)
Operating income per unit	$ 7		$ 11

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 24,000 additional units of closed-toe shoes or 20,000 additional units of open-toe shoes could be sold without changing the unit selling price of either product.

Required:

1. Prepare a differential analysis report presenting the additional revenue and additional costs anticipated from the promotion of closed-toe shoes and open-toe shoes.

Wedge Shoe Company- Proposals for Sales Promotion Campaign Differential Analysis Report

	Closed-Toe Shoes	Open-Toe Shoe
Differential revenue from proposals	$	$
Differential cost of proposals:
Direct materials	$	$
Direct labor
Variable factory overhead
Variable selling expenses
Sales promotion expenses
Differential cost of proposals	$	$
Net differential income from proposed sales promotion campaign	$	$