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Handbags R Us sells designer and everyday priced handbags. Top management is deciding which product ...

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Handbags R Us sells designer and everyday priced handbags. Top management is deciding which product ...

Handbags R Us sells designer and everyday priced handbags. Top management is deciding which product line to emphasize. Company accountants have provided the following data:

   Designer
Per Item   Everday
Per Item

Average Sales Price    $250     $95
Average Variable Costs   100    25
Average Contribution Margin   150     70
Average Fixed Costs (allocated)   30    10
Average Operating Income    $120     $60

The store has 5,000 square feet of floor space. If the company emphasizes everyday handbags, it can display 1,000 items in the store. If the store emphasizes designer handbags, it can display only 680 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 intermediate answers.)

Textbook

Horngren's Financial & Managerial Accounting, The Financial Chapters

Edition: 5^th

Authors: Miller-Nobles, Mattison, Matsumura

Read 178 times

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7 years ago

Makes perfect sense, thx

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