Drexel Hall - Contribution Margin $756,000 Traceable Fixed...

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The marketing manager of Drexel-Hall is considering two alternative strategies, each of which  would cost $15,000 per month. One strategy is to advertise the name Drexel-Hall, which is  expected to increase the monthly sales in all stores by 5 percent. The other strategy is to  emphasize the low prices available at Store 2, which is expected to increase monthly sales at  Store 2 by $150,000, but to reduce sales by $30,000 per month at Stores 1 and 3. Determine the expected effect of each strategy on the company’s overall income from operations. Scenario 1 Sales $1,890,000 ($1,800,000 * 1.05) Variable Costs $1,134,000 ($1,080,000 * 1.05)
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Unformatted text preview: Contribution Margin $756,000 Traceable Fixed Costs: Controllable $432,000 Performance Margin $324,000 Traceable Fixed Costs: Committed $180,000 Store Responsibility Margin $144,000 Common Fixed Costs $36,000 Income From Operations $108,000 (Increase of $36,000) Scenario 2 Sales $1,890,000 ($1,800,000 + $90,000) Variable Costs $1,134,000 ($1,080,000 + $90,000) Contribution Margin $756,000 Traceable Fixed Costs: Controllable $432,000 Performance Margin $324,000 Traceable Fixed Costs: Committed $180,000 Store Responsibility Margin $144,000 Common Fixed Costs $36,000 Income From Operations $108,000 (Increase of $36,000)...
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This note was uploaded on 03/23/2012 for the course ACCT 306 taught by Professor Mikewoodard during the Spring '12 term at DeVry Houston.

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