EXERCISE 7-4. Incremental Analysis Nelson Design, a Kitchen and Bath design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Atlanta Home Show. The exhibit will cost the company

$10,000 for space. At the show, Nelson Design will present a slide show on a PC, pass out brochures that were printed previously (the company printed more than needed), and show its portfolio of previous jobs.

The company estimates that revenue will increase by $30,000 over the next year as a result of the exhibit. For the previous year, profit was as follows:

Revenue Less:

Design supplies Salary of Laura Nelson (owner)

Salary of Emily Holder (full time employee)

Rent Utilities Depreciation of office equipment Printing of advertising materials Advertising in Atlanta Home Magazine Travel expenses other than depreciation of autos Depreciation of company cars Net income

$170,000

$10,000 72,000 5 1 ,000 18,000 4,000 2,500 500 2,000 1,000 8,000 169,000

$ 1,000 Required Calculate the impact of the exhibit on company profit. Should the company exhibit at the home show?