Question
Question : If Landon Sports (see information on text pg. 3-17) approves $75,000 of additional spending on a new marketing program designed to grow shoe
Question:
If Landon Sports (see information on text pg. 3-17) approves $75,000 of additional spending on a new marketing program designed to grow shoe sales, how many pairs of shoes will need to be sold to maintain the current amount of operating income?
(your answer should be formatted without any commas; example: 20,000 = 20000)
Info Needed:
Since Landon Sports cannot sell part of a shoe or part of a jersey, the breakeven points must be rounded up to the next whole unit14,316 pairs of shoes and 21,474 jerseys. Breakeven in sales dollars is $1,717,920: $644,220 for jerseys ($30 21,474) and $1,073,700 ($75 14,316) for shoes. More sales dollars are needed to break even and achieve other income targets relative to the original sales mix because, although the shoes have a higher contribution margin per unit than the jerseys ($10.00 compared to $6.00), the contribution margin ratio for shoes is lower than the contribution margin ratio for jerseys. That means that with this mix, less of each sales dollar is available after covering variable expenses to cover fixed expenses and profit.
A B D G H 1 F Landon Sports Revised Income Statement For the 52 Weeks Ended January 30, 2021 2 3 4 5 6 7 Sales 8 Cost of goods sold 9 Sales commissions 10 Tags 11 Variable expenses 12 Contribution margin 13 Selling and marketing expenses 14 Administrative expenses 15 Fixed expenses 16 Operating income Jerseys Total Per Unit Percentage $ 900,000 $ 30.00 100.00% 660,000 22.00 73.33% 45,000 1.50 5.00% 15,000 0.50 1.67% 720,000 24.00 80.00% $ 180,000 $ 6.00 20.00% Shoes Total Per Unit Percentage $ 1,500,000 $ 75.00 100.00% 1,215,000 60.75 81.00% 75,000 3.75 5.00% 10,000 0.50 0.67% 1,300,000 86.67% $ 200,000 $ 10.00 13.33% Total Company Total Percentage $ 2,400,000 100.00% 1,875,000 78.13% 120,000 5.00% 25,000 1.04% 2,020,000 84.17% $ 380,000 15.83% 172,000 100,000 272,000 $ 108,000 65.00Step by Step Solution
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