Cheertime Company produces three lines of greeting cards scented, musical, and regular. There are common fixed expenses of $7,500 (meaning this expense is applied only 1 time no matter if the company produces one line or all three lines). The additional financial information for all three lines is below: Scented: Sales $ 10,000 Variable expenses $ 7,000 Advertising $ 4,000 Musical: Sales $ 15,000 Variable expenses $ 12,000 Advertising $ 5,000 Regular: Sales $ 25,000 Variable expenses $ 12,500 Advertising $ 3,000 With the current financial information, Cheertime's current operating income is a loss of $1,000. For 2022, the president of Cheertime is considering two alternatives to cut down on losses: 1) completely eliminating the scented and musical card lines which she projects will decrease the sales and variable expenses of the regular greeting card line by 20%. Or 2) Increasing advertising by $250 for the scented line and $750 for the musical line which she projects will increase the sales and variable expenses of BOTH of these lines by 30%. 1. Create an income statement below for the first alternative.
Cheertime Company produces three lines of greeting cards scented, musical, and regular. There are common fixed
expenses of $7,500 (meaning this expense is applied only 1 time no matter if the company produces one line or all
three lines). The additional financial information for all three lines is below:
Scented:
Sales $ 10,000
Variable expenses $ 7,000
Advertising $ 4,000
Musical:
Sales $ 15,000
Variable expenses $ 12,000
Advertising $ 5,000
Regular:
Sales $ 25,000
Variable expenses $ 12,500
Advertising $ 3,000
With the current financial information, Cheertime's current operating income is a loss of $1,000. For 2022, the
president of Cheertime is considering two alternatives to cut down on losses: 1) completely eliminating the
scented and musical card lines which she projects will decrease the sales and variable expenses of the regular
greeting card line by 20%. Or 2) Increasing advertising by $250 for the scented line and $750 for the musical line
which she projects will increase the sales and variable expenses of BOTH of these lines by 30%.
1. Create an income statement below for the first alternative.
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