Rocket Shoe Company is planning a one-month campaign for August to promote sales of one of its two shoe products. A total of $122,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign.

	Cross-Trainer Shoe		Running Shoe
Unit selling price	$50		$55
Unit production costs:
Direct materials	$ (9)		$(12)
Direct labor	(3)		(4)
Variable factory overhead	(2)		(3)
Fixed factory overhead	(5)		(6)
Total unit production costs	$(19)		$(25)
Unit variable selling expenses	(16)		(15)
Unit fixed selling expenses	(9)		(6)
Total unit costs	$(44)		$(46)
Operating income per unit	$ 6		$ 9

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 29,000 additional units of cross-trainer shoes or 24,000 additional units of running shoes could be sold without changing the unit selling price of either product.

Required:

Question Content Area

1. Prepare a differential analysis report presenting the additional revenue and additional costs anticipated from the promotion of cross-trainer shoes and running shoes.

Rocket Shoe Company
Proposals for Sales Promotion Campaign
Differential Analysis Report

	Cross-Trainer Shoes	Running Shoe
Differential revenue from proposals
Differential cost of proposals:
Direct materialsFixed factory overheadOperating income per unitUnit fixed selling expensesUnit selling priceDirect materials
Direct laborFixed factory overheadOperating income per unitUnit fixed selling expensesUnit selling priceDirect labor
Fixed factory overheadOperating income per unitUnit fixed selling expensesUnit selling priceVariable factory overheadVariable factory overhead
Fixed factory overheadOperating income per unitUnit fixed selling expensesUnit selling priceVariable selling expensesVariable selling expenses
Fixed factory overheadOperating income per unitSales promotion expensesUnit fixed selling expensesUnit selling priceSales promotion expenses
Differential cost of proposals	]
Net differential income from proposed sales promotion campaignNet differential loss from proposed sales promotion campaignNet differential income from proposed sales promotion campaign

Answer rating: 100% (QA)

Rocket Shoe Company Proposals for Sales Promotion Campaig... View the full answer