1. Infinity Designs, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Home and Garden Expo. The exhibit will cost the company $12,000 for space. At the show, Infinity Designs will present a slide show on a PC, pass out brochures that are printed previously, (the company printed 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 the previous year, profit was as follows: Revenue $201,000
Less: Design supplies (variable cost) $17,000
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) $2,800
Depreciation of company cars 9,000
Required: Calculate the impact of the exhibit on company profit.
2. Current year, the company is considering outsourcing the survey to Global Associates, who have offered to conduct the survey and summarize results for $30,900.Craig Sunshine, the president of Sunshine Motors, believes that Global will do a higher-quality job than his company has been doing, but is unwilling to spend more than $10,000 above the current costs. The head of bookkeeping for Sunshine has prepared the following summary of costs related to the survey in the prior year.
Mailing $16,400
Printing (done by Lester Print Shop) $4,500
Salary of Pat Fisher, part-time employee who stuffed envelopes and summarized data when surveys were returned (100 hours X $15) $1,500
Share of depreciation of computer and software used to track survey responses and summarized results. $1,100
Share of electricity/phone/etc. based on square feet of space occupied by Pat Fisher vs. entire company. $500
REQUIRED: What is the incremental cost of going outside versus conducting the survey as in the past?