Acc102 Principles of Managerial Accounting: Final Project - Metro Video

Acc102 Principles of Managerial Accounting Final Project Shown below is the current monthly income statement of Metro Video, by profit centers: METRO VIDEO Income Statement by Profit Centers For the Month Ended April 30, 20__ Metro Video Segments Equipment Sales Video Rentals Dollars % Dollars % Dollars % Sales 560,000 100% 280,000 100% 280,000 100% Variable costs (268,800) -48% (198,800) -71% (70,000) -25% Contribution margin 291,200 52% 81,200 29% 210,000 75% Fixed costs traceable to departments (67,200) -12% (25,200) -9% (42,000) -15% Departments responsibility margins 224,000 40% $56,000 20% $168,000 60% Common fixed costs (61,600) -11% Income from operations $162,400 29% On the basis of this information, compute the increase in monthly income from operations that may be expected to result from each of the following actions:
(a) Spending $5,000 per month in advertising is expected to increase sales in the Equipment Sales Department by 35%.
(b) Closing the Equipment Sales Department and allowing the Video Rentals Department to expand is expected to increase the revenue of the Video Rentals Department by $105,000 per month. This action also is expected to increase fixed costs traceable to the Video Rentals Department by $40,000 per month.
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