Percy's Porcelain Works manufactures fine vases. The company produces two designs: a square vase and a round vase. The planning team is discussing the coming year's activities. To start the discussion, the company controller and the marketing manager have provided the following information on costs and revenues. Total expected sales of both products combined 40,000 Square Round Selling price (per vase) $25 $45 Less: variable costs (per vase) Direct materials 5 7 Direct labour 4 5 Overhead 2 3 Selling costs 1 1 CM (per vase) $13 $29 Percentage of total unit sales 70% 30% Total CM $364,000 $348,000 $712,000 Fixed manufacturing costs 200,000 Fixed selling and administrative expense 160,000 Operating income $352,000 The planning team would like to increase operating income by focusing on the round model. To do this, they plan to increase advertising by $200,000 and sales commissions per round vase by $1. The team expects that this will increase sales to a total of 47,000 vases, and increase the sales of round vases from 30% to 40% of the sales mix. 

What will be the new operating income if these changes are implemented and the sales are as predicted?  

Answer rating: 100% (QA)

New Operating Income with Increased Focus on Round Vases Heres how to calculate the new operating income for Percys Porcelain Works if the changes are ... View the full answer