Sola Mates Inc. is planning a one-month campaign for July to promote sales of one of its two shoe products. A total of $100,000 has been budgeted for advertising, contests, redeemabla coupons, and other promotional activities. The following data have been assembled for thei possible usetuiness in deciding which ot the products to select for the campaign: Tennis Shoe Walking Shoe 535 100 Unit selling price Unit production costs Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit production costs Unit variable seling expenses Unit toxed selling expenses Total unit casts Operating income per unit $19 $32 16 $50 $60 6 10 20 $76 No increase in facilcies would be necessary to produce and sell the increased output. It is antcipated that 7,000 additional units of tennis shoes or 7,000 additional units of walking shoes could be soid without changinp the unit selling price of ether produCt 1. Prepare a differential analysi5 as of June 19 to determine whether to promote tenn shoes (Alternative 1) or walking shoes (Alternative 2) Refer to the usts or Labeis and Amount Descnptions for the exact wardting of the enswer choices for text entries. For those boxes im which you must enter subtracted or negative numbers use a minus sign it there is no amount or an amount is zero, enter D: Acovon ( will automaticaly appear required 2. The sales manager had tentatively decided to promote waiking shoes, estimsting that aperating income wound be incressed by $5,000 (315 operating income per unit for 7,000 units, less promotion expenses of $100,000) The manager aiso believed that the selection of tennis hoes would reduce operating income by 537,000 (59 operating income per unit for 7,000 unvts, less promotion expenses of S100,000). State briefy your reasons for supporting or opposing the tentative decision Differential Analysis 1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1 or walking shoes (Alternative 2). Refer to the lists of Labels and Amount for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. if there is no amount or an amount is zero, enter o. A colon () wil automatically appear if required Differential Analysis Promote Tennis Shoe (Alternative 1) or Promote Walking Shoe (Alternative 2) June 19 Labels and Amount Descriptions Labels Cash fiows from investing activities Cash flows from operating activities Costs Amount Descriptions Cash payments for merchandise Cash received from customers Direct labor Direct materials Gain on sale of investments Income (loss) Promote Tennis Shoe Promote Walking Shoe Differential Effect on Income Alternative 1 Altermative 2) (Alternative 2) Label) 10 Determine whemer to promote tennis shoes (Altemative 1) or waiking shoes (Atemative 2). Promcte tennis shoes The company is indifferent since the result is the same regardless of which aiternative is chosen Promcte walking shoes X Points:01 2. The sales manager hed tentatively decided to promote walking shoes, estimating mst operating incame would be incressed by $5,000 (513 operating income per uit for 7,000 unts, less promotion expenses of s100,000) The mansger aso believed thet the selecion ar tennis shoes would reduce operating income by $37,000 ($9 operating income per unit for 7,000 unts less promation expenses ors100 000). State briely your ressons for supporting ar opposing the fentahive deciaion The sales manager's tentative decision should be opposed .The sales manager erroneouslyconsidered the full unit costs instead of the dfferentilal lasotonal revenue and differential (adoditiona) costs. An analysis simlar to that presented in part () would lead to the selection of _tennis shoesfor the promotional campaign because this alternative will contribute more to operating income than would be conbributed by promoting_walking shoes Points:515