Regal Flair Enterprises has two product lines-jewelry and women's apparel. Cost and revenue data for each product line for the current month are as follows. decide which product line to adve Product Lines Jewelry Apparel $900,000 $400,000 Sales 40% 30% Variable costs as a percentage of sales $225,000 $240,000 Fixed costs traceable to product lines In addition to the costs shown, the company incurs monthly fixed costs of $130,000 common to both product lines. Instructions a. Prepare Regal Flair Enterprises's responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns showing all dollar amounts as percentages of sales. b. Assume that a marketing survey shows that a $80,000 monthly advertising campaign focused on either product line should increase that product line's monthly sales by approximately $120,000. Do you recommend this additional advertising for either or both product lines? Show computations to support your conclusions. c. Management is considering expanding one of the company's two product lines. An invest- ment of a given dollar amount is expected to increase the sales of the expanded product line by $300,000. It is also expected to increase the traceable fixed costs of the expanded product line by 70 percent. On the basis of this information, which product line do you recommend expanding? Explain the basis for your conclusion.
Regal Flair Enterprises has two product lines-jewelry and women's apparel. Cost and revenue data for each product line for the current month are as follows. decide which product line to adve Product Lines Jewelry Apparel $900,000 $400,000 Sales 40% 30% Variable costs as a percentage of sales $225,000 $240,000 Fixed costs traceable to product lines In addition to the costs shown, the company incurs monthly fixed costs of $130,000 common to both product lines. Instructions a. Prepare Regal Flair Enterprises's responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns showing all dollar amounts as percentages of sales. b. Assume that a marketing survey shows that a $80,000 monthly advertising campaign focused on either product line should increase that product line's monthly sales by approximately $120,000. Do you recommend this additional advertising for either or both product lines? Show computations to support your conclusions. c. Management is considering expanding one of the company's two product lines. An invest- ment of a given dollar amount is expected to increase the sales of the expanded product line by $300,000. It is also expected to increase the traceable fixed costs of the expanded product line by 70 percent. On the basis of this information, which product line do you recommend expanding? Explain the basis for your conclusion.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
22.2A
Transcribed Image Text:decide which product line to advertise?
L022-4, LO22-5
M 22.2A
data for each product line for the current month are as follows.
Product Lines
g and Using
pility Income
Is
Jewelry
Apparel
$900,000
$400,000
Sales ...
Variable costs as a percentage of sales .
40%
30%
Fixed costs traceable to product lines
$225,000
$240,000
In addition to the costs shown, the company incurs monthly fixed costs of $130,000 common to
both product lines.
Instructions
a. Prepare Regal Flair Enterprises's responsibility income statement for the current month. Report
the responsibility margin for each product line and income from operations for the company as
a whole. Also include columns showing all dollar amounts as percentages of sales.
b. Assume that a marketing survey shows that a $80,000 monthly advertising campaign focused
on either product line should increase that product line's monthly sales by approximately
$120,000. Do you recommend this additional advertising for either or both product lines?
Show computations to support your conclusions.
c. Management is considering expanding one of the company's two product lines. An invest-
ment of a given dollar amount is expected to increase the sales of the expanded product line
by $300,000. It is also expected to increase the traceable fixed costs of the expanded product
line by 70 percent. On the basis of this information, which product line do you recommend
expanding? Explain the basis for your conclusion.
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