David, the owner of a local poster shop, comes to you for help. We've only been...

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David, the owner of a local poster shop, comes to you for help. "We've only been breaking even the past two years, and I'm getting very frustrated! I don't know what to do because I feel like I've already tried to improve our processes as much as possible, but we still haven't been able to generate a profit. Do you have any suggestions as to how we can turn things around? I just don't think we can even consider moving forward with this business unless we can earn $10,000 in operating income next year. Even then, we'll have to think long and hard about what the future holds." David shares the following information with you, as you ponder different scenarios to help your friend. Selling price Cost for paper, per unit Cost for printing, per unit Cost for film, per unit Staff salaries Other operating costs $7.10 0.75 0.80 0.50 44,000 21,145 After thinking about it for a while, you suggest the following possibilities to help him turn things around. 1. 2. 3. 4. Lower the selling price by 10% to increase sales volume by 5%. Advertise on the radio and with social media, for a combined cost of $1,000, to increase volume by 10%. Use a more affordable paper on which to print the posters (available for $0.60 per unit), in combination with a less-expensive film to cover the top of the poster (available for $0.40 per unit). Instead of paying the salespeople a fixed salary, move to a commission-based compensation plan (save $20,000 in salary: incur $1.50 per unit sold commission), which should increase sales volume by 20%. David, the owner of a local poster shop, comes to you for help. "We've only been breaking even the past two years, and I'm getting very frustrated! I don't know what to do because I feel like I've already tried to improve our processes as much as possible, but we still haven't been able to generate a profit. Do you have any suggestions as to how we can turn things around? I just don't think we can even consider moving forward with this business unless we can earn $10,000 in operating income next year. Even then, we'll have to think long and hard about what the future holds." David shares the following information with you, as you ponder different scenarios to help your friend. Selling price Cost for paper, per unit Cost for printing, per unit Cost for film, per unit Staff salaries Other operating costs $7.10 0.75 0.80 0.50 44,000 21,145 After thinking about it for a while, you suggest the following possibilities to help him turn things around. 1. 2. 3. 4. Lower the selling price by 10% to increase sales volume by 5%. Advertise on the radio and with social media, for a combined cost of $1,000, to increase volume by 10%. Use a more affordable paper on which to print the posters (available for $0.60 per unit), in combination with a less-expensive film to cover the top of the poster (available for $0.40 per unit). Instead of paying the salespeople a fixed salary, move to a commission-based compensation plan (save $20,000 in salary: incur $1.50 per unit sold commission), which should increase sales volume by 20%.

Answer rating: 100% (QA)

lets calculate the potential financial impact of each of the four suggestions step by step Given Information Selling price710 per poster Costs per uni... View the full answer