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Please help! I do not know how to compute questions 4-6. Thank you so much in advance! 4. A local and very successful marketing firm
Please help! I do not know how to compute questions 4-6. Thank you so much in advance!
4. A local and very successful marketing firm has proposed to Craig a $6,000 advertising campaign for the retail store. They have projected the annual sales volume to increase by 25% as a result of this campaign. Assuming that the projections are correct, what effect would this advertising campaign have on Craig's annual operating income for the retail store? Note: Fixed costs will remain the same. 5. Should Craig invest in the advertising campaign? Why or Why not? 6. What would sales need to be in order for Craig to earn a $50,000 operating income on the retail store? (independent of #5 ) 1. Compute Craig's Current Operating Income: Craig's operating income can be computed as follows: \begin{tabular}{l||lr||} \hline \hline Sales Revenue & $ & 75,000 \\ Less: Variable expenses & 20,250 \\ Contribution Margin & & 54,750 \\ Less: Fixed expenses & 23,250 \\ Operating Income & $ & 31,500 \\ \hline \hline \end{tabular} 2. Calculate the Contribution Margin Ratio: \begin{tabular}{|c|c|c|c|} \hline \multirow[t]{2}{*}{ Contribution margin ratio } & = & \multicolumn{2}{|r|}{$54,750} \\ \hline & = & 73% & $75,000 \\ \hline \end{tabular} 3. Calculate Craig's company breakeven point in Sales Dollars? \begin{aligned} Breakeven in sales dollars & \( =\frac{\$ 23,250}{73 \%} \\ & =\$ 31,849\end{aligned} \) 4. Determine if Craig should also embark on a $6,000 advertising campaign. Show your work for full credit 5. Should Craig invest? Why or Why not? 6. What would Sales need to be if Craig wanted to earn a $50,000 operating income on the retail store? (do not include advertising information from previous question) Breakeven in sales dollars ==Step by Step Solution
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