Infinity Designs, an interior design company, has experienced a drop in business due to an increase...

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Infinity Designs, an interior designcompany, has experienced a drop in business due to an increase ininterest rates and a corresponding slowdown in remodeling projects.To stimulate business, the company is considering exhibiting at theHome and Garden Expo. The exhibit will cost the company $12,000 forspace. At the show, Infinity Designs will present a slide show on aPC, pass out brochures that are printed previously, (the companyprinted more than needed), and show its portfolio of previous
jobs.
The company estimates that revenue will increase by$36,000 over the next year as a result of the exhibit. For theprevious year, profit was as follows:
Revenue $201,000
Less:
Design supplies (variable cost) $15,000
Salary of Samantha Spade (owner) 80,000
Salary of Kim Bridesdale (full time employee) 55,000
Rent 18,000
Utilities 6,000
Depreciation of office equipment 3,600
Printing of advertising materials 700
Advertising in Middleton Journal 2,500
Travel expenses other than depreciation of autos(variable cost) $2,400
Depreciation of company cars 9,000
Required:
Calculate the impact of the exhibit on companyprofit.
Round to two decimal places.
Your Answer:

Answer & Explanation Solved by verified expert

3.9 Ratings (415 Votes)

Particulars Year 1 Year 2 Expense based upon Revenue ratio to expenses Note Revenue A 201000 237000 Revenue increase by 36000 in year 2 Less Design supplies variable cost 15000 17687 Revenue 746 Design Supplies depend revenue and is a direct cost of revenue generation We assume it as a percentage of revenue Salary of Samantha Spade owner 80000 80000 Fixed Salary of owner is fixed and in time of downturn of business we expect these would remain constant or decrease Here we have take it as See Answer

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Infinity Designs, an interior designcompany, has experienced a drop in business due to an increase ininterest rates and a corresponding slowdown in remodeling projects.To stimulate business, the company is considering exhibiting at theHome and Garden Expo. The exhibit will cost the company $12,000 forspace. At the show, Infinity Designs will present a slide show on aPC, pass out brochures that are printed previously, (the companyprinted more than needed), and show its portfolio of previousjobs.The company estimates that revenue will increase by$36,000 over the next year as a result of the exhibit. For theprevious year, profit was as follows:Revenue$201,000Less:Design supplies (variable cost)$15,000Salary of Samantha Spade (owner)80,000Salary of Kim Bridesdale (full time employee)55,000Rent18,000Utilities6,000Depreciation of office equipment3,600Printing of advertising materials700Advertising in Middleton Journal2,500Travel expenses other than depreciation of autos(variable cost)$2,400Depreciation of company cars9,000Required:Calculate the impact of the exhibit on companyprofit.Round to two decimal places.Your Answer:

	Revenue		$201,000
	Less:
	Design supplies (variable cost)	$15,000
	Salary of Samantha Spade (owner)	80,000
	Salary of Kim Bridesdale (full time employee)	55,000
	Rent	18,000
	Utilities	6,000
	Depreciation of office equipment	3,600
	Printing of advertising materials	700
	Advertising in Middleton Journal	2,500
	Travel expenses other than depreciation of autos(variable cost)	$2,400
	Depreciation of company cars	9,000


Required:
Calculate the impact of the exhibit on companyprofit.