Rocket Shoe Company is planning a one-month campaign for August 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. Cross-Trainer Shoe Running Shoe Unit selling price $76 $84 Unit production costs: Direct materials $ (14) $(18) Direct labor (5) (6) Variable factory overhead (3) (5) Fixed factory overhead (7) (9) Total unit production costs $(29) $(38) Unit variable selling expenses (24) (23) Unit fixed selling expenses (14) (8) Total unit costs $(67) $(69) Operating income per unit $ 9 $ 15 No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 28,000 additional units of cross-trainer shoes or 23,000 additional units of running shoes could be sold without changing the unit selling price of either product. Required: 1. Prepare a differential analysis report presenting the additional revenue and additional costs anticipated from the promotion of cross-trainer shoes and running shoes. Rocket Shoe Company Proposals for Sales Promotion Campaign Differential Analysis Report Cross-Trainer Shoes Running Shoe Differential revenue from proposals $ $ Differential cost of proposals: Direct materials $ $ Direct labor Variable factory overhead Variable selling expenses Sales promotion expenses Differential cost of proposals $ $ Net differential income from proposed sales promotion campaign $ $ 2. The sales manager had tentatively decided to promote cross-trainer shoes, estimating that operating income would be increased by $169,000 ($15 operating income per unit for 23,000 units, less promotion expenses of $176,000). The manager also believes that the selection of running shoes will decrease operating income by $76,000 ($9 operating income per unit for 28,000 units, less promotion expenses of $176,000). Should the sales managers tentative decision be accepted or opposed? The sales managers tentative decision should be accepted . The cross-trainer shoe will contribute more to operating income than would be contributed by promoting the running shoes .