Question
The Vision Pluss Company produces its famous sunglasses, the Basking in the Sun, that sells for $70 per pair. Operating income for 2020 is as
The Vision Pluss Company produces its famous sunglasses, the Basking in the Sun, that sells for $70 per pair. Operating income for 2020 is as follows: Salos revenue ($70 per pair Variable cost (S30 per pair Contribution margin Fixed cost Operating income $350,000 150,000 200,000 100 000 $100,000 Vision Plus would like to increase its profitability over the next year by at least 25%. To do so, the company is considering the following options: Required: 1. Replace a portion of its variable labor with an automated machining process. This would result in a 20% decrease in variable cost per unit but a 15% increase in fixed costs. Sales would remain the same. (10 marks) 2. Spend $25,000 on a new advertising campaign, which would increase sales by 10%. (5 marks) 3. Increase both selling price by $10 per unit and variable costs by $8 per unit by using a higher-quality lens material in the production of its glasses. The higher-priced glasses would cause demand to drop by approximately 20%. (10 marks) 4. Add a second manufacturing facility that would double Vision's fixed costs but would increase sales by 60%. (10 marks) Evaluate each of the alternatives considered by Vision Plus Do any of the options meet or exceed Vision's targeted increase in income of 25%? What should Vision Plus do?
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