Professor Kilchenmann recently started a business called Accounting in a Box to sell

two new accounting board games. The first is a game related to financial accounting

called $$Debit or Credit, the Home Game.$$ The second is a game related to managerial

accounting called $$Fixed or Variable $($and Sometimes Mixed$),$ a Game for Friends.$$ He

is unsure about how to distribute the games to his potential customers, so he has

decided to sell each board game using a different sales model. For Debit or Credit, he

has decided to sell directly to local retailers $($there are no salespeople involved$).$ For

Fixed or Variable $($and Sometimes Mixed$),$ he has decided to hire a team of salespeople

to sell the game door$-$to$-$door. Direct labor workers are paid $$20$ per hour. He has

made the following estimates pertaining to each game for April $2024$:

Debit or Credit Fixed or Variable $...$

Estimated sales $($in units$)15,00010,000$

Direct materials cost per unit $$5\mathrm{.}28$ $$6\mathrm{.}25$

Direct labor required to make one unit $($in hours$)0\mathrm{.}300\mathrm{.}50$

Overhead is applied based on direct labor hours. He made the following estimates

pertaining to $2024$:

Total

Estimated total overhead $($all overhead is variable$)$ $$122,400$

Estimated direct labor hours $51,000$

Other Assumptions:

$$ The selling price is determined using cost$-$plus pricing $($based on manufacturing

cost$)$ with a markup of $40\%.$

$$ Salespeople are paid entirely on commissions and are paid $$2\mathrm{.}60$ per unit sold.

$$ Advertising costs are fixed at $$5,000$ for the month. Of the total, $$3,000$ relates

to Debit or Credit and $$2,000$ relates to Fixed or Variable $($and Sometimes

Mixed$).$

$$ Administrative costs are common fixed costs and are fixed at $$10,000$ for the

month

What is the contribution margin per unit for Debit or Credit?

What is the contribution margin per unit for Fixed or Variable $($and Sometimes Mixed$)?$

Prepare a properly formatted segmented income statement $($each product is a segment$)$

for Accounting in a Box for April $2024.$

The salespeople think that Fixed or Variable $($and Sometimes Mixed$)$ is overpriced and

that they could sell $2,500$ additional units if the price of the game was reduced by $$4\mathrm{.}00$

per unit. What would be the change in net operating income if this plan is adopted?

Would you recommend that this plan be adopted? Why or why not? Show any

calculations that helped you reach your decision.