Assumptions: Sales price per ticket = $1,572 Variable cost per unit = $786 (cost
ID: 2419207 • Letter: A
Question
Assumptions:
Sales price per ticket = $1,572
Variable cost per unit = $786 (cost of goods sold of $707 + Sales commissions of $79)
Complete the table below:
Alternative #1
Per unit
Total
Per unit
Total
# of sales tickets
7000
Selling price per ticket
$1,572
$11,000,000
Variable cost per ticket
$786
$5,500,000
Contribution margin per ticket
$786
$5,500,000
Total fixed costs
5,981,000
Net income
$(481,000)
Change in net income if accept alternative
Breakeven point in units
7,610
Review of Question #4 requirements. Increase advertising by $20,000, increase sales revenue (volume) by 2%.
For each question, answer yes or no for each piece of information listed.
Information
For this alternative only, is there a change in this item that affects calculation of net income? Yes or No
For this alternative only, is there a change in this item that effects the calculation of the new breakeven point? Yes or No
Selling price per unit
Variable cost per unit
Total fixed costs
Net income
Sales volume
Complete the table below:
Alternative #3
Per unit
Total
Per unit
Total
# of sales tickets
7000
Selling price per ticket
$1,572
$11,000,000
Variable cost per ticket
$786
$5,500,000
Contribution margin per ticket
$786
$5,500,000
Total fixed costs
5,981,000
Net income
$(481,000)
Change in net income if accept alternative
Breakeven point in units
7,610
Alternatives
Change in Net Income
New Breakeven point in units
Change in Breakeven point in units
#1 Decrease SP, Increase sales volume
#2 Eliminate sales commissions
Increases by $550,000
6,914
Decreases by 696
#3 increase Fixed costs by $20,000 to get increase of 2% sales revenue (volume)
Basic information Exhibit 1 Hallstead Jewelers Income Statements for Years Ended January 31 (thousands of dollars) 2003 2004 2006 Sales $9,000,000 $8,000,000 $11,000,000 Cost of goods sold 4,050,000 3,600,000 4,950,000 Gross margin $4,950,000 $4,400,000 $6,050,000 Expenses Selling expense Salaries 2,021,000 2,081,000 4,085,000 Commissions 450,000 400,000 550,000 Advertising 254,000 250,000 257,000 Administrative expenses 418,000 425,000 535,000 Rent 420,000 420,000 840,000 Depreciation 84,000 84,000 142,000 Miscellaneous expenses 53,000 93,000 122,000 Total expenses $3,700,000 $3,753,000 $6,531,000 Net income $1,250,000 $647,000 $(481,000) Exhibit 2 Hallstead Jewelers Operating Statistics 2003 2004 2006 Sales space (square feet) 10,000 10,000 15,000 Sales per square foot $900 $800 $733 Sales tickets 5,000 5,000 7,000 Average sales ticket $1,800 $1,600 $1,571Explanation / Answer
Review of Question #4 requirements. Increase advertising by $20,000, increase sales revenue (volume) by 2%. For each question, answer yes or no for each piece of information listed. Information For this alternative only, is there a change in this item that affects calculation of net income? Yes or No For this alternative only, is there a change in this item that effects the calculation of the new breakeven point? Yes or No Selling price per unit Yes Yes Variable cost per unit No No Total fixed costs Yes Yes Net income Yes No Sales volume Yes Yes Alternative 3 Change in Net Income New Breakeven point Chane in breakeven points in unit -281000 7292.28 317 Decrease (481000)+0.02*11000000-20000 6531000-20000-550000/(1603.44-786) Alternative 1 -870000 3441.452643 Decrease (481000)-11000000+(7500*(1572*.9)) (6531000-550000)/1414.8-786) 4168 Decrease
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