Question list

Question $1$

Question $2$

Question $3$

Gadgets of the Past $($GOP$)$ produces old$-$fashioned simple corkscrews. Last year was not a good year for sales but GUP expects the market to pick up this year. Last year's income statement showed the following.

View the income statement.

To take advantage of the anticipated growth in the market, GOP is considering various courses of action:

View the courses of action.

Requirements

Evaluate each of the alternatives considered by GOP. What should GOP do$?$

Requirement. Evaluate the alternatives by completing an income statement for each alternative.

$\backslash$table$[[,$Alternative $1,$Alternative $2,$Alternative $3,$Alternative $4],[$Sales Revenue,II$,,,],[$Variable Costs,,,,$],[$Contribution Margin$],[$Fixed Costs,,,,$],[$erating Income,$1,=,,]]$

Courses of action

Do nothing. If GOP does nothing, it expects sales to increase by $10\%$

Spend $$4,000$ on a new advertising campaign that is expected to increase sales by $60\%.$

Raise the price of the corkscrew to $$7\mathrm{.}00.$ This is expected to decrease sales quantities by $20\%.$

Redesign the classic corkscrew and increase the selling price to $$8\mathrm{.}00$ while increasing the variable costs by $$2\mathrm{.}00$ per unit. The sales level is not expected to change from last year.

Income Statement

$\backslash$table$[[$Sales revenues $($ $$6\mathrm{.}00$ per corkscrew$),$S$,120,000],[$Variable cost $($ $$3\mathrm{.}00$ per corkscrew$),,60,000],[$Contribution margin,,$60,000],[$Fixed cost$,,24,000],[$Operating income,S$,36,000]]$