QUESTION 1 Pullock Purse sells designer and everyday priced handbags. Top management is deciding which product line to emphasize. Company accountants have provided the following data:

	Designer Per Item	Everyday Per Item
Average Sales Price	$250	$95
Average Variable Costs	100	25
Average Contribution Margin	150	70
Average Fixed Costs (allocated)	30	10
Average Operating Income	$120	$60

The store has 5,000 square feet of floor space. If the company emphasizes everyday handbags, it can display 1,000 items in the store. If the store emphasizes designer handbags, it can display only 680 items. These numbers are also the average monthly sales in units.

Prepare an analysis to show which product the company should emphasize. Explain your answer. (Do not round intermediate answers.)

QUESTION 2

1) Carolyn Fields has just won the state lottery. The state offers the following three payout options for after-tax prize money:

1. $50,000 per year at the end of each of the next six years

2. $300,000 (lump sum) now

3. $400,000 (lump sum) six years from now

Calculate the present value of each scenario using an 8% annual discount rate. Round to nearest whole dollar.

Present value of an ordinary annuity of $1:

	7%	8%	9%
1	0.935	0.926	0.917
2	1.808	1.783	1.759
3	2.624	2.577	2.531
4	3.387	3.312	3.240
5	4.100	3.993	3.890
6	4.767	4.623	4.486

Present value of $1:

	7%	8%	9%
1	0.935	0.926	0.917
2	0.873	0.857	0.842
3	0.816	0.794	0.772
4	0.763	0.735	0.708
5	0.713	0.681	0.650
6	0.666	0.630	0.596