Question
Paver Interiors, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling
Paver Interiors, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Middleton Home and Garden Expo. The exhibit will cost the company $ 14,900 for space. At the show, Paver Interiors will present a slide show on a laptop, pass out brochures that were printed previously (the company printed more than needed), and show its portfolio of previous jobs. The company estimates that revenue will increase by $ 39,620 over the next year as a result of the exhibit. For the previous year, profit was as follows:
Revenue | $ 210,723 | ||||
Less: | |||||
Design supplies | $ 17,861 | ||||
Salary of Samantha Spade (owner) | 82,523 | ||||
Salary of Kim Bridesdale (full-time employee) | 55,564 | ||||
Rent | 18,875 | ||||
Utilities | 7,520 | ||||
Depreciation of office equipment | 4,010 | ||||
Printing of advertising materials | 810 | ||||
Advertising in Middleton Journal | 2,830 | ||||
Travel expenses other than depreciation of autos | 2,820 | ||||
Depreciation of company cars | 10,550 | 203,363 | |||
Net income | $ 7,360 |
Assume that design supplies and travel other than depreciation are variable costs. Calculate the impact of the exhibit on company profit. (Round intermediate calculations to 4 decimal places, e.g. 0.3215 and final answer to 0 decimal places, e.g. 125.)
Will the company's profits increase or decrease and by how much?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started