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Computer Boutique_Dropping of Home office furniture

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Question;Computer Boutique sells computer equipment and home;office furniture. Currently, the furniture product line takes up approximately;50% of the company's retail floor space. The president of Computer Boutique is;trying to decide whether the company should continue offering furniture or just;concentrate on computer equipment. If furniture is dropped, salaries and other;direct fixed costs can be avoided. In addition, sales of computer equipment can;increase by 13%. Allocated fixed costs are assigned based on relative sales.;Computer;Home Office;Equipment;Furniture;Total;Sales;$1,200,000;$800,000;$2,000,000;Less cost of;goods sold;$700,000;$500,000;$1,200,000;Contribution;margin;$500,000;$300,000;$800,000;Less direct fixed;costs;Salaries;$175,000;$175,000;$350,000;Other;$60,000;$60,000;$120,000;Less allocated;fixed costs;Rent;$14,118;$9,882;$24,000;Insurance;$3,529;$2,471;$6,000;Cleaning;$4,117;$2,883;$7,000;President's;salary;$76,470;$53,350;$130,000;Other;$7,058;$4,942;$12,000;Total costs;$340,292;$308,528;$649,000;Net Income;$159,708;($8,528);$151,180

 

Paper#37367 | Written in 18-Jul-2015

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