3-42. CVP, SENSITIVITY ANALYSIS. Jan's Ornaments sells handmade ornaments for $35.00 per ornament. Operating information for...

 

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3-42. CVP, SENSITIVITY ANALYSIS. Jan's Ornaments sells handmade ornaments for $35.00 per ornament. Operating information for 2020 is as follows: Sales revenue ($35 per ornament) Variable cost ($20 per ornament) Contribution margin Fixed costs Operating income $420,000 240,000 180,000 160,000 $20,000 Jan, the owner of the company, wants to increase operating income over the next year by at least $20,000. To do so, the company is considering the following options: Required 1. Spend $25,000 on advertising, which should result in a 15% increase in sales. 2. Increase selling price to $39 per ornament, which is expected to decrease sales by 10%. 3. Automate some steps in the manufacturing process, which would increase fixed costs by $30,000 and decrease variable cost to $18.00 per unit. Sales would remain the same. 4. Increase the selling price to $36 and decrease variable costs to $19. 3-42. CVP, SENSITIVITY ANALYSIS. Jan's Ornaments sells handmade ornaments for $35.00 per ornament. Operating information for 2020 is as follows: Sales revenue ($35 per ornament) Variable cost ($20 per ornament) Contribution margin Fixed costs Operating income $420,000 240,000 180,000 160,000 $20,000 Jan, the owner of the company, wants to increase operating income over the next year by at least $20,000. To do so, the company is considering the following options: Required 1. Spend $25,000 on advertising, which should result in a 15% increase in sales. 2. Increase selling price to $39 per ornament, which is expected to decrease sales by 10%. 3. Automate some steps in the manufacturing process, which would increase fixed costs by $30,000 and decrease variable cost to $18.00 per unit. Sales would remain the same. 4. Increase the selling price to $36 and decrease variable costs to $19.

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To increase the operating income by at least 20000 lets analyze the impact of each option on Jans Or... View the full answer