Sole Mates Inc. is planning a one-month campaign for July to promote sales of one of its two shoe products. A total of $97,000 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		$45			$50
Unit production costs:
	Direct materials	$8		$11
	Direct labor	3		4
	Variable factory overhead	2		3
	Fixed factory overhead	4		5
	Total unit production costs	$17		$23
Unit variable selling expenses	14		14
Unit fixed selling expenses	8		5
	Total unit costs	$39		$42
Operating income per unit	$6		$8

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 23,000 additional units of tennis shoes or 19,000 additional units of walking shoes could be sold from the campaign without changing the unit selling price of either product.

Required:

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 subtracted amounts, negative amounts, or a loss.

	Promote Tennis Shoes (Alternative 1)	Promote Walking Shoes (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank 72a2a9069f90fa1_1	$fill in the blank 72a2a9069f90fa1_2	$fill in the blank 72a2a9069f90fa1_3
Costs:
Direct materials	fill in the blank 72a2a9069f90fa1_4	fill in the blank 72a2a9069f90fa1_5	fill in the blank 72a2a9069f90fa1_6
Direct labor	fill in the blank 72a2a9069f90fa1_7	fill in the blank 72a2a9069f90fa1_8	fill in the blank 72a2a9069f90fa1_9
Variable factory overhead	fill in the blank 72a2a9069f90fa1_10	fill in the blank 72a2a9069f90fa1_11	fill in the blank 72a2a9069f90fa1_12
Variable selling expenses	fill in the blank 72a2a9069f90fa1_13	fill in the blank 72a2a9069f90fa1_14	fill in the blank 72a2a9069f90fa1_15
Sales promotion	fill in the blank 72a2a9069f90fa1_16	fill in the blank 72a2a9069f90fa1_17	fill in the blank 72a2a9069f90fa1_18
Income (Loss)	$fill in the blank 72a2a9069f90fa1_19	$fill in the blank 72a2a9069f90fa1_20	$fill in the blank 72a2a9069f90fa1_21

2. Determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2).

Promote tennis shoesPromote walking shoes

3. The sales manager had tentatively decided to promote walking shoes, estimating that operating income would be increased by $55,000 ($8 operating income per unit for 19,000 units, less promotion expenses of $97,000). The manager also believed that the selection of tennis shoes would increase operating income only by, $41,000 ($6 operating income per unit for 23,000 units, less promotion expenses of $97,000). State briefly your reasons for supporting or opposing the tentative decision.

The sales manager's tentative decision should be

acceptedopposed

. The sales manager

correctlyerroneously

considered the full unit costs instead of the differential (additional) revenue and differential (additional) costs. An analysis similar to that presented in part (1) would lead to the selection of

tennis shoeswalking shoes

for the promotional campaign, because this alternative will contribute

moreless

to operating income than would be contributed by promoting

tennis shoeswalking shoes

.