Question: The following information for Pet Palace a large retail store

The following information for Pet Palace, a large retail store that sells pet-related merchandise, was recorded for the first quarter. The store tracks merchandise according to product type. The category “Other” includes accessories such as dog beds, leashes, kitty litter boxes, bird cages, and so on. The company is considering several different strategies to improve operations for the next quarter.

A. Create a spreadsheet that Pet Palace managers can use for sensitivity analysis. Modify information in the data input section and answer the questions in the following parts.
B. What is Pet Palace’s breakeven point? What total revenue is necessary for a target after-tax income of $100,000?
C. Pet Palace managers are considering their advertising campaign for the next period. They believe they could spend an additional $10,000 on advertising for a product line and increase sales by 10%. One manager wants to increase advertising on pets because that product line is currently the smallest. Another manager believes the ads should promote the most profitable products, but they are not sure which products those would be. What is the after-tax income if pets are promoted? What is the most profitable product? What is the after-tax income if that product is promoted?
D. What factors, other than the quantitative results, might influence managers’ decisions to increaseadvertising?

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  • CreatedJanuary 26, 2015
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