Rocket Shoe Company is planning a one-month campaign for August to promote sales of one of its two shoe products. A total of $500,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign. Cross-TrainerShoe RunningShoe Unit selling price $ 90 $112 Unit production costs: Direct materials $ (24) $(30) Direct labor (10) (8) Variable factory overhead (6) (6) Fixed factory overhead (8) (16) Total unit production costs $(48) $(60) Unit variable selling expenses (12) (12) Unit fixed selling expenses (4) (16) Total unit costs $(64) $(88) Operating income per unit $ 26 $ 24 No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 25,000 additional units of cross-trainer shoes or 18,000 additional units of running shoes could be sold without changing the unit selling price of either product. Required: 1. Prepare a differential analysis report presenting the additional revenue and additional costs anticipated from the promotion of cross-trainer shoes and running shoes. Rocket Shoe Company Proposals for Sales Promotion Campaign Differential Analysis Report Cross-Trainer Shoe Running Shoe Differential revenue from proposals $ $ Differential cost of proposals: Direct materials $ $ Direct labor Variable factory overhead Variable selling expenses Sales promotion expenses Differential cost of proposals $ $ Net differential income from proposed sales promotion campaign $ $ 2. The sales manager has tentatively decided to promote cross-trainer shoes, estimating that operating income will increase by $150,000 ($26 operating income per unit for 25,000 units, less promotion expenses of $500,000). The manager also believes that the selection of running shoes will decrease operating income by $68,000 ($24 operating income per unit for 18,000 units, less promotion expenses of $500,000). Should the sales manager's tentative decision be opposed or accepted?The sales manager’s tentative decision should be opposed . The sales manager erroneously considered the full unit costs instead of the differential differential revenue/costs

Rocket Shoe Company is planning a one-month campaign for August to promote sales of one of its two shoe products. A total of $500,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign. Cross-TrainerShoe RunningShoe Unit selling price $ 90 $112 Unit production costs: Direct materials $ (24) $(30) Direct labor (10) (8) Variable factory overhead (6) (6) Fixed factory overhead (8) (16) Total unit production costs $(48) $(60) Unit variable selling expenses (12) (12) Unit fixed selling expenses (4) (16) Total unit costs $(64) $(88) Operating income per unit $ 26 $ 24 No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 25,000 additional units of cross-trainer shoes or 18,000 additional units of running shoes could be sold without changing the unit selling price of either product. Required: 1. Prepare a differential analysis report presenting the additional revenue and additional costs anticipated from the promotion of cross-trainer shoes and running shoes. Rocket Shoe Company Proposals for Sales Promotion Campaign Differential Analysis Report Cross-Trainer Shoe Running Shoe Differential revenue from proposals $ $ Differential cost of proposals: Direct materials $ $ Direct labor Variable factory overhead Variable selling expenses Sales promotion expenses Differential cost of proposals $ $ Net differential income from proposed sales promotion campaign $ $ 2. The sales manager has tentatively decided to promote cross-trainer shoes, estimating that operating income will increase by $150,000 ($26 operating income per unit for 25,000 units, less promotion expenses of $500,000). The manager also believes that the selection of running shoes will decrease operating income by $68,000 ($24 operating income per unit for 18,000 units, less promotion expenses of $500,000). Should the sales manager's tentative decision be opposed or accepted?The sales manager’s tentative decision should be opposed . The sales manager erroneously considered the full unit costs instead of the differential differential revenue/costs

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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Question

	Cross-Trainer Shoe	Running Shoe
Unit selling price	$ 90		$112
Unit production costs:
Direct materials	$ (24)		$(30)
Direct labor	(10)		(8)
Variable factory overhead	(6)		(6)
Fixed factory overhead	(8)		(16)
Total unit production costs	$(48)		$(60)
Unit variable selling expenses	(12)		(12)
Unit fixed selling expenses	(4)		(16)
Total unit costs	$(64)		$(88)
Operating income per unit	$ 26		$ 24

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 25,000 additional units of cross-trainer shoes or 18,000 additional units of running shoes could be sold without changing the unit selling price of either product.

Required:

1. Prepare a differential analysis report presenting the additional revenue and additional costs anticipated from the promotion of cross-trainer shoes and running shoes.

Rocket Shoe Company
Proposals for Sales Promotion Campaign
Differential Analysis Report
	Cross-Trainer Shoe	Running Shoe
Differential revenue from proposals	$	$
Differential cost of proposals:
Direct materials	$	$
Direct labor
Variable factory overhead
Variable selling expenses
Sales promotion expenses
Differential cost of proposals	$	$
Net differential income from proposed sales promotion campaign	$	$

2. The sales manager has tentatively decided to promote cross-trainer shoes, estimating that operating income will increase by $150,000 ($26 operating income per unit for 25,000 units, less promotion expenses of $500,000). The manager also believes that the selection of running shoes will decrease operating income by $68,000 ($24 operating income per unit for 18,000 units, less promotion expenses of $500,000). Should the sales manager's tentative decision be opposed or accepted?
The sales manager’s tentative decision should be opposed . The sales manager erroneously considered the full unit costs instead of the differential differential revenue/costs

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