WP7-71A (similar to) Question Help O Natural Seating Company is currently selling 1,500 oversized bean bag chairs a month at a price of $70 per chair. The variable cost of each chair sold includes $40 to purchase the bean bag chairs from suppliers and a $2 sales commission Fixed costs are $6,000 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 1. Prepare the company's current contribution margin income statement (Use parentheses or a minus sign for an operating loss.) Natural Seating Company Contribution Margin Income Statement Sales revenue $ 105,000 Variable expenses S Cost of goods sold 60.000 3,000 63.000 Operating expenses Contribution margin 42,000 6,000 Fixed expenses 36.000 Operating income (loss) 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 14% of the sales price rather than the current $2 per unit. (Use parentheses or a minus sign for an operating oss.) ? Enter any number in the edit fields and then click Check Answer. Clear All Check Answer 7 parts remaining Natural Seating Company is currently selling 1,500 oversized bean bag chairs a month at a price of $70 per chair. The variable cost of each chair sold includes $40 to purchase the bean bag chairs from suppliers and a $2 sales commissio Fixed costs are $6,000 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 Fixed expenses Uuuu $ Operating income (loss) 36,000 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 14% of the sales price rather than the current $2 per unit. (Use parentheses or a minus sign for an operating loss.) Natural Seating Company * Requirements Contribution Margin Income Statement Sales revenue Variable expenses 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 Cost of goods sold operating income as you calculated in Requirement 1. Consider each alternative separately Operating expenses a. Alternative 1: The company believes volume will increase by 10% if salespeople are Contribution margin 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 $1,000 on Fixed expenses advertising would increase sales volume by 5% Operating income (loss) c. Alternative 3: The company is considering raising the selling price to $82, but believes volume would drop by 18% as a result d. Alternative 4: The company would like to source the product from domestic suppliers Enter any number in the edit fields and then click Check Answer who charge $11 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 7 parts increase the sales price by $14 per unit. In addition, the company would have to Check Answer remaining spend an additional $5,000 in marketing costs to get the word out to potential customers of this change
