Tuffet Seating Company is currently selina 2200 oversized bean bag chare a month at a price of $30 per chair. The variable cost of each chair sold includes $35 to purchase the bean bag chairs from suppliers and a $2 3ales commission. Fixed coate are $6,000 per month. The company is considering maing several operational changes and wants to know how the change wil impact is operating income Read the outcome expenses: Tuffet Seating Company Contribution Margin Income Statement Sales revenue $ 176.000 Variable Cost of goods sold s 77.000 4 40g 81.400 Operating expenses Contrbution margin 94 God Fixed expenses 6.000 $ 88.600 Operating income llocs Requirement 2. Calculate the change in operating income that would result fram implementing each of the following incependent strategy alternatives. Compare nach alterative to the current operating income as you calculated in Requirement 1. Consider cach alternative separately. a. Alternative 1: The company believes volume will increase by 20% ir salespeople are paid a commission of 14% of the sale price rather than the current $2 per unit. (Una parentheses or a minus sign for an operating loss.) Tuffet Seating Company Contribution Margin Income Statement Sales revenue Cost of goode sold Operating evene Conle bulion margin Fixed expenses Operating income loex) firsanthenrik Chrnk Calculate the change in operating income that would result from implementing each of the following independent strategy alternatives. Compare each alternative to the current operating income as you calculated in Requirement 1. Consider each alternative separately. a. Alternative 1: The company believes volume will increase by 20% if salespeople are paid a commission of 14% of the sales price rather than the current $2 per unit. b. Alternative 2: The company believes that spending an additional $5,500 on advertising would increase sales volume by 15%. c. Alternative 3: The company is considering raising the selling price to $88, but believes volume would drop by 15% as a result. d. Alternative 4: The company would like to source the product from domestic suppliers who charge $13 more for each unit. Management believes that the "Made in the USA" label would increase sales volume by 20% and would allow the company to increase the sales price by $14 per unit. In addition, the company would have to spend an additional $5,500 in marketing costs to get the word out to potential customers of this change
