Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In the introduction paraphrase the below scenario using APA format and describe what steps you would take to analyze and evaluate the advertising director's proposal

In the introduction paraphrase the below scenario using APA format and describe what steps you would take to analyze and evaluate the advertising director's proposal using break even analysis. You are the plant accountant for a company that makes a popular brand of basketball shoes. Currently, your company sea 1,000 pairs of shoes. each month for $100 apiece . The variable costs are 40% of sales and the fixed costs are $35,000/ month . The company's advertising director is asking for an increase in her marketing budget of 1,500 per month. She plans to enhance her marketing campaign in a targeted area of the west Coast . She estimates that the additional advertising will result in a 50% increase in demand.For this situation, the additional advertising cost are considered a fixed cost .What is the impact of this request on the company's operating income? On the other hand ,the production manager believes that this increase in sales could put pressure on the production line..He estimates that there will need to be a $2.00 increase in labor cost per unit [a pair of shoes]. Consider the following: Using the projected monthly income figure calculated above, how many units would the company need to sell to meet the initial monthly operating income figure? What is the break even sales volume needed? Create a break down using this template and include in your paper : 1) Original Break -even calculating (page 891 ) Sales ( total number of shoes sold in a month ? Variable cost (40%). 40,000. Contribution margin sales - Variable cost) ? Fixed cost - given 35,000. Operating income (Contribution margin - fixed cost) ? Break - even point (fixed cost/ variable cost per unit)=? 2). Revised Break -even after extra $1,500 of advertising Sales New Sales (new sales volume x selling price of each shoe) (50%x 1,000)+ 1,000) x$100 ? Variable cost (original 40%+$2/pair) (Selling price x new variable cost /pair)? Contribution margin (Sales- Variable Cost) ? Fixed cost (original fixed cost + additional marketing cost) (35,000+1,500). 36,500 Operating income ( Contribution margin - fixed cost)? Break -even point(fixed cost/ variable cost per unit)=. =? Analysis (2 pages) Explain the benefits and limitations of break even analysis? Discuss how organizations can use " a What if?" analysis to evaluate alternatives like the Advertising Director's proposal (an example of what if analysis is part 2 of your calculations. Given the results of your calculations above compare thew pros and cons or each of the two break -even results, and Make a rec on whether the company should change or not

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Excel Applications For Accounting Principles

Authors: Gaylord SmithBruce Walz

4th Edition

1133388027, 9781133388029

More Books

Students also viewed these Accounting questions

Question

1. To understand how to set goals in a communication process

Answered: 1 week ago