The annual data that follow pertain to Swim ClearlySwim Clearly, a manufacturer of swimming goggles (the company had no beginning inventory):

(DATA TABLE)

Sales Price ----------------- $47

Variable Manufacturing Expense Per Unit-------- $20

Sales Commission Expense Per Unit -------$13

Fixed Manufacturing Overhead -------$1,935,000

Fixed Operating Expenses ---------$230,000

Number of Goggles Produced ---------$215,000

Number of Goggles Sold ------------$193,000

Requirements

(ABSORPTION COSTING)

Sales Revenue ----------- $9,071,000

Less: Cost of Goods Sold-------- $5,597,000

Gross Profit ----------$3,474,000

Less: Operating Expenses ----------$ 2,739,000

Operating Income-------- $735,000

(VARIABLE COSTING)

Sales Revenue -------------- $9,071,000

Less: Variable Expenses ------------------------

Variable of goods sold----------- $3,860,000

Variable Operating Expenses---------- $2,509,000

Contribution Margin -------------$ 2,702,000

Less: Fixed Expenses------------------------

Fixed manufacturing overhead------------- $1,935,000

Fixed Operating Expenses-------- $230,000

Operating Income ---------------- $537,000

1. (QUESTION TO ANSWER) The company marketing vice president believes a new sales promotion that costs

$165,000 would increase sales to 215,000 goggles. Should the company go ahead with the promotion? Give your reason

Use the contribution margin income statement format to evaluate sales promotion.

Increase in contribution margin ______________
Increase in fixed expenses __________________
Increase in operating income _________________

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