Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please solve for option 2. then answer what level of sales he would be indifferent between the 2 plans (option 2 is using 10.625 per
Please solve for option 2. then answer what level of sales he would be indifferent between the 2 plans (option 2 is using 10.625 per unit for 2400 mascots sold.) Thank you for the help!
"I'll never understand this accounting stuff," Blake Dunn yelled, waving the income statement he had just received from his accountant in the morning mail. "Last month, we sold 2,000 stuffed State University mascots and earned \$6,565 in operating income. This month, when we sold 3,000 I thought we'd make $9,848. But this income statement shows an operating income of $11,615 ! How can I ever make plans if I can't predict my income? I'm going to give Janice one last chance to explain this to me," he declared as he picked up the phone to call Janice Miller, his accountant. "Will you try to explain this operating income thing to me one more time?" Blake asked Janice. "After I saw last month's income statement, I thought each mascot we sold generated $3.28 in net income; now this month, each one generates $3.87 ! There was no change in the cost we paid for each mascot, so I don't understand how this happened. If I had known I was going to have $11,615 in operating income, I would have looked more seriously at adding to our product line." Taking a deep breath, Janice replied, "Sure, Blake. I'd be happy to explain how you made so much more operating income than you were expecting." Using the following income statements, prepare a contribution margin income statement for March. (Round per unit answers to 2 decimal places, e.g. 52.75.) Blake is evaluating two options to increase the number of mascots sold next month. First, he believes he can increase sales by advertising in the university newspaper. Blake can purchase a package of 12 ads over the next month for a total of $1,500. He believes the ads will increase the number of stuffed mascots sold from 1,500 to 2,200. A second option would be to reduce the selling price. Blake believes a 15% decrease in the price will result in 2,400 mascots sold. Calculate the operating income for each options? (Round per unit to 2 decimal places and final answers to 0 decimal places, e.g. 5,275.) Which plan should Blake implement? At what level of sales would he be indifferent between the two plans? (Round per unit to 2 decimal places and round up the final answer to the nearest whole unit, e.g. 5,275.) mascots Attempts: 1 of 3 usecStep 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