Tuttet Seating Company is currently selling 2.400 oversized bean bag chairs a month at a price of $75 per chair. The variable cost of each chair sold includes $30 to purchase the bean bag chairs from suppliers and a s7 sales commission. Fixed costs are $8,000 per month The company is considering making several operational changes and wants to know how the change will impact its operating income. Read the requirements Requirement 2. 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 10% if salespeople are paid a commission of 5% of the sales price rather than the current $7 per unit (Use parentheses or a minus sign for an operating loss.) Tuffet Seating Company Contribution Margin Income Statement Sales revenue Variable expenses Cost of goods sold Operating expenses Contribution margin Fixed expenses Operating income (loss) Operating income from implementing these changes would from Requirement1 Tuffet Seating Company is currently selling 2.400 oversized bean bag chairs a month at a price of 575 per chair. The variable cost of each chair sold includes $30 to purchase the bean bag chairs from suppliers and a 57 sales commission. Fixed costs are $8,000 per month The company is considering making several operational changes and wants to know how the change will impact its operating income. Read the requirements b. Alternative 2: The company believes that spending an additional $5,500 on advertising would increase sales volume by 13%. (Use parentheses or a minus sign for an operating loss.) Tuffet Seating Company Contribution Margin Income Statement Sales revenue Variable expenses Cost of goods sold Operating expenses Contribution margin Forced expenses Operating income (los) Operating income from implementing these changes would from Requirement1 Tuffet Seating Company is currently selling 2.400 oversized bean bag chairs a month at a price of $75 per chair. The variable cost of each chair sold includes $30 to purchase the bean bag chairs from suppliers and a $7 sales commission. Fixed costs are $8,000 per month. The company is considering making several operational changes and wants to know how the change will impact its operating income Read the requirements Operating income from implementing these changes would from Requirement 1 C. Alternative 3: The company is considering raising the seling price to $95, but believes volume would drop by 18% as a result (Use parentheses or a minus sign for an operating loss.) Tuffet Seating Company Contribution Margin Income Statement Sales revenue Variable expenses Cost of goods sold Operating expenses Contribution margin Fixed expenses Operating income foss) Operating income from implementing these changes would from Requirement1 d. Alternative 4: The company would like to source the product from domestic suppliers who charge $15 more for each unit Management believes that the "Made in the USA" label would increase sales volume by 10% and would allow the company to increase the sales price by $6 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. (Use parentheses or a minus sign for an operating loss.) Tuffet Seating Company Contribution Margin Income Statement Sales revenue Variable expenses Cost of goods sold Operating expenses Contribution margin Fixed expenses Operating income (loss) Operating income from implementing these changes
