Select solutions to Chapter 14.doc

SelectsolutionstoChapter14PROBLEM14-44(25MINUTES)ContemporaryTrendswillbeworseoffby$6,……………………..$190,000$230,000$70,000Less:Variablecosts….114,000161,00056,000Contributionmargin….$76,000$69,000$14,000 Ifwallpaperisclosed,then:Lossofwallpapercontributionmargin…...$(14,000)Remodeling…………………………………….(6,200)Addedprofitabilityfromcarpetsales*……32,500Fixedcostsavings($22,500x40%)……….9,000Decreasedcontributionmarginfrompaintandsupplies($76,000x20%)……………..(15,200)Increasedadvertising………………………..(12,500)e(loss)fromclosure…………………$(6,400)*Thecurrentcontributionmarginratioforcarpetingis30%($69,000÷$230,000).Thisratiowillincreaseto35%,producinganewcontributionforthelineof$101,500[($230,000+$60,000)x35%].Theendresultisthatcarpeting’scontributionmarginwillriseby$32,500($101,500-$69,000),(.,apastcostthatisnotrelevanttothedecision).Regardlessofwhetherthedepartmentisclosed,ContemporaryTrendswillhaveawallpaperinventoryof$11,850.-andmagazine-basedfirmslikelyhaveseveraladvantages:,-incustomers.-andmagazine-,ontheotherhand,-45(50MINUTES)Setsresultina20%increase,or1,500dresses(1,250´=1,500).pletesets 70%1,0501,0501,essorycape 6%9090Dressandhandbag 15%225225Dressonly 9%135                     Totalunitsifadditionalitemsareintroduced 100%1,5001,1401,275Less:Unitsalesifadditionalitemsarenotintroduced 1,250       --          --    Incrementalsales 2501,1401,275Incrementalcontributionmarginperunit(excludingmaterialandcuttingcosts) ´$´$´$ $48,000$14,592$6,120$68,712Additionalcosts:Ad