Required:1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs. Ifrequired, use a minus sign to indicate a loss.Differential AnalysisPromote Tennis Shoes (Alt. 1) or Promote Walking Shoes (Alt. 2)June 19PromotePromoteDifferentialWalking Shoes(Alternative 1) (Alternative 2) (Alternative 2)Tennis ShoesEffectsRevenuesCosts:Direct materialsDirect laborVariable factory overheadVariable selling expensesSales promotionProfit (loss)$2. Determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2).3. The sales manager had tentatively decided to promote walking shoes, estimating that operating income would be increased by $153,000 ($14 operating income per unit for 24,000 units, less promotion expensesof $183,000). The manager also believed that the selection of tennis shoes would reduce operating income by, $78,000 ($9 operating income per unit for 29,000 units, less promotion expenses of $183,000). Statebriefly your reasons for supporting or opposing the tentative decision.The sales manager's tentative decision should beThe sales managerconsidered the full unit costs instead of the differential (additional) revenue and differential(additional) costs. An analysis similar to that presented in part (1) would lead to the selection offor the promotional campaign, because this alternative will contributetooperating income than would be contributed by promoting Differential Analysis for Sales Promotion ProposalSole Mates Inc. is planning a one-month campaign for July to promote sales of one of its two shoe products. A total of $183,000 has been budgeted for advertising, contests, redeemable coupons, and otherpromotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:TennisWalkingShoesShoesUnit selling price$69$76Unit production costs:Direct materials$(12)$(16)Direct labor(4)(5)Variable factory overhead(3)(4)Fixed factory overhead(7)(9)Total unit production costs$(26)$(34)Unit variable selling expenses(22)(20)Unit fixed selling expenses(12)(8)Total unit costs$(60)$(62)Operating income per unit$9$14No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 29,000 additional units of tennis shoes or 24,000 additional units of walking shoes could be sold withoutchanging the unit selling price of either product.Required:1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs. Ifrequired, use a minus sign to indicate a loss.Differential AnalysisPromote Tennis Shoes (Alt. 1) or Promote Walking Shoes (Alt. 2)June 19PromotePromoteDifferentialTennis ShoesWalking ShoesEffects(Alternative 1) (Alternative 2) (Alternative 2)

Under differential analysis, we would measure the difference in income due to adoption of…

1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs. If required, use a minus sign to indicate a loss. Differential Analysis Promote Tennis Shoes (Alt. 1) or Promote Walking Shoes (Alt. 2) June 19 Promote Promote Differential Tennis Shoes Walking Shoes (Alternative 1) (Alternative 2) (Alternative 2) Effects Revenues Costs: Direct materials Direct labor Variable factory overhead Variable selling expenses Sales promotion Profit (loss) 2. Determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2).

1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs. If required, use a minus sign to indicate a loss. Differential Analysis Promote Tennis Shoes (Alt. 1) or Promote Walking Shoes (Alt. 2) June 19 Promote Promote Differential Tennis Shoes Walking Shoes (Alternative 1) (Alternative 2) (Alternative 2) Effects Revenues Costs: Direct materials Direct labor Variable factory overhead Variable selling expenses Sales promotion Profit (loss) 2. Determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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