Question Content Area

Differential Analysis for Sales Promotion Proposal

Sole Mates Inc. is planning a one-month campaign for July to promote sales of one of its two shoe products. A total of $176,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:

		Tennis Shoes			Walking Shoes
Unit selling price			$69			$76
Unit production costs:
	Direct materials		$(12)			$(16)
	Direct labor		(4)			(5)
	Variable factory overhead		(3)			(4)
	Fixed factory overhead		(7)			(9)
	Total unit production costs		$(26)			$(34)
Unit variable selling expenses			(22)			(20)
Unit fixed selling expenses			(12)			(8)
	Total unit costs		$(60)			$(62)
Operating income per unit			$9			$14

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 28,000 additional units of tennis shoes or 23,000 additional units of walking shoes could be sold without changing the unit selling price of either product.

Required:

Question Content Area

1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs. If required, use a minus sign to indicate a loss.

Differential Analysis Promote Tennis Shoes (Alt. 1) or Promote Walking Shoes (Alt. 2) June 19

	Promote Tennis Shoes (Alternative 1)	Promote Walking Shoes (Alternative 2)	Differential Effects (Alternative 2)
Revenues
Costs:
Direct materials
Direct labor
Variable factory overhead
Variable selling expenses
Sales promotion
Profit (loss)