Pippa Purse sells designer and everyday priced handbags. Top management is deciding which product line to...

Transcribed Image Text:

Pippa Purse sells designer and everyday priced handbags. Top management is deciding which product line to emphasize. Company accountants have provided the following data: Designer Per Everyday Per Item Item Average Sales Price $ 250 $ 102 Average Variable Costs 96 17 Average Contribution Margin 154 85 Average Fixed Costs (allocated) 28 11 $ 126 $ 74 Average Operating Income The store has 4,800 square feet of floor space. If the company emphasizes everyday handbags, it can display 1,392 items in the store. If the store emphasizes designer handbags, it can display only 960 items. These numbers are also the average monthly sales in units. Prepare an analysis to show which product the company should emphasize. Explain your answer. (Do not round items per square foot and round the total contribution margin to the nearest cent.) Start by calculating the contribution margin per square foot for the Designer handbags. Designer Contribution margin per item Items per square foot of display space Total contribution margin per square foot of display space Amount Calculate the contribution margin per square foot for the Everyday handbags. Everyday Contribution margin per item Items per square foot of display space Total contribution margin per square foot of display space Amount Based on the analysis, which handbag should Pippa emphasize? Pippa Purse sells designer and everyday priced handbags. Top management is deciding which product line to emphasize. Company accountants have provided the following data: Designer Per Everyday Per Item Item Average Sales Price $ 250 $ 102 Average Variable Costs 96 17 Average Contribution Margin 154 85 Average Fixed Costs (allocated) 28 11 $ 126 $ 74 Average Operating Income The store has 4,800 square feet of floor space. If the company emphasizes everyday handbags, it can display 1,392 items in the store. If the store emphasizes designer handbags, it can display only 960 items. These numbers are also the average monthly sales in units. Prepare an analysis to show which product the company should emphasize. Explain your answer. (Do not round items per square foot and round the total contribution margin to the nearest cent.) Start by calculating the contribution margin per square foot for the Designer handbags. Designer Contribution margin per item Items per square foot of display space Total contribution margin per square foot of display space Amount Calculate the contribution margin per square foot for the Everyday handbags. Everyday Contribution margin per item Items per square foot of display space Total contribution margin per square foot of display space Amount Based on the analysis, which handbag should Pippa emphasize?

Answer rating: 100% (QA)

To determine which product line Pippa Purse should emphasize we will calculate the contribution marg... View the full answer