Build_a_Spreadsheet_14_45

Build_a_Spreadsheet_14_45 - Loss of wall paper contribution...

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DATA INPUT Wallpaper Sales $380,000 $460,000 $140,000 Variable Costs $228,000 $322,000 $112,000 Fixed Costs $56,000 $75,000 $45,000 Total Costs $284,000 $397,000 $157,000 Operating Income (loss) $96,000 $63,000 $(17,000) Remodeling Remodeling Costs $12,400 Increased Sales $120,000 Increased Contribution Margin 5% Wallpaper fixed costs cut 40% Loss of Paint Sales 20% New Adveritising $25,000 SOLUTION Tipton will be worse off by $12800 if it discontinues wallpaper sales Wallpaper Sales $380,000 $460,000 $140,000 Less: Variable Costs $228,000 $322,000 $112,000 Contribution Margin $152,000 $138,000 $28,000 If wallpaper is closed, then:
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Unformatted text preview: Loss of wall paper contribution margin $(28,000) Remodeling $(12,400) Added profitability from carpet sales* $65,000 Fixed Cost Savings $18,000 Decreased Contribution Margin from paint & supplies $(30,400) Increased Advertising $(25,000) Total Income (loss) from closure $(12,800) * The current contribution margin ratio for carpeting is 30% ($138000/$460000) This ratio will increase to 35%, producing a new contribution for the line $203,000 [($460000 + $120000) x 35%] The end result is that the carpeting's contribution margin will rise by $65,000 ($203000 - $138000) boosting the firm profitability by the same amount...
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This note was uploaded on 02/29/2012 for the course E 101 taught by Professor Sfere during the Spring '12 term at Abilene Christian University.

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