PLPLED

PLEASE ANSWER ALL REQUIREMENTS THANK YOU

PROBLEM:

Your boss (the District Manager) has authorized you to spend $10,000 for advertising for one of your chains local stores, promoting one of their product lines. A Marketing Research class at Bridgewater State University conducted a study indicating that the additional advertising would increase sales of the AM/FM radios by $50,000 and increase sales of the HD radios by only $45,000.

The local store manager (who never took a course in Managerial Accounting) argues that the advertising budget should be spent on the AM/FM radios because it will result in more sales dollars. The store manager also argues that the AM/FM radio lines total sales are substantially higher than the HD line, therefore as the biggest selling item, it should receive all advertising allotments.

REQUIRED: YOU ARE TO WORK INDEPENDENTLY

a) Determine which product line (AM/FM radios or HD radios) you will spend the $10,000 of advertising on. Show your work, justifying this decision, based upon a cost/benefit analysis. What would you tell the store manager? Include a short memo to your boss (the District Manager) explaining your decision.

b) Using Excel, prepare new segmented income statements (including the new sales and cost data) based upon your recommendation. (hint: on what line would the $10,000 of dedicated advertising appear?) You should submit 3 segmented income statements. The first being the original data on front of this page, the second, assuming the advertising is spent on AM/FM and the third assuming the advertising is spent on HD radios.

c) What form of media would you recommend using to advertise your chosen product line? (explain why)

d) Are there any implicit considerations that should enter the decision on which product line to promote?

Total Department AM/FM radios HD radios 1 00% Sales Less variable expenses Contribution Margin Less Traceable Fixed Expenses Segment Margiin Less Common Fixed Expenses Net Operating Income $320,000 | 10090 | | $270,000 | 100% | $50,000 236,000| 84,000| 15,000 | 8090| 20.000 | 2090| 30,000 5,000 69.000 | 2290 | | $44,000 | 16% | $25,000 74% 26% 5% 216,000 54,000 10,000 4000 60% 10% 50% 4% 40,000| 13% $29,000| 9% Total Department AM/FM radios HD radios 1 00% Sales Less variable expenses Contribution Margin Less Traceable Fixed Expenses Segment Margiin Less Common Fixed Expenses Net Operating Income $320,000 | 10090 | | $270,000 | 100% | $50,000 236,000| 84,000| 15,000 | 8090| 20.000 | 2090| 30,000 5,000 69.000 | 2290 | | $44,000 | 16% | $25,000 74% 26% 5% 216,000 54,000 10,000 4000 60% 10% 50% 4% 40,000| 13% $29,000| 9%