Question

Tri Town Interiors, 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 Middleton Home and Garden Expo. The exhibit will cost the company $14,980 for space. At the show, Tri Town Interiors will present a slide show on a laptop, pass out brochures that were printed previously (the company printed more than needed), and show its portfolio of previous jobs.

The company estimates that revenue will increase by $40,060 over the next year as a result of the exhibit. For the previous year, profit was as follows: $213,615 $18,106 81,459 56,285 18,811 Revenue Less: Design supplies Salary of Samantha Spade (owner) Salary of Kim Bridesdale (full-time employee) Rent Utilities Depreciation of office equipment Printing of advertising materials Advertising in Middleton Journal Travel expenses other than depreciation of autos Depreciation of company cars Net income 6,570 4,000 812 3,080 2,890 9,930 201,943 $11,672
Assume that design supplies and travel other than depreciation are variable costs.
Calculate the impact of the exhibit on company profit. (Round intermediate calculations to 4 decimal places, e.g. 0.3215 and final answer to 0 decimal places, e.g. 125.)
Company profit will _______ by _______
Should the company exhibit at the home show?
The company ________ exhibit at the home show.

Answer 1

Tri Town Interiors

Company profit will increase by $21,272.

The company should exhibit at the home show.

Step-by-step explanation:

a) Data and Calculations:

Cost of the exhibit = $14,980

Increase in revenue from the exhibit = $40,060

Increase in revenue from the exhibit = 19% ($40,060/$213,615 * 100)

Design supplies = $21,365 ($18,106 * 1.19)

Travel expenses other than depreciation of autos = $3,439 ($2,890 * 1.19)

Revenue $213,615 $253,675

Less:

Design supplies $18,106 $21,365

Salary of Samantha Spade (owner) 81,459 81,459

Salary of Kim Bridesdale

(full-time employee) 56,285 56,285

Rent 18,811 18,811

Utilities 6,570 6,570

Depreciation of office equipment 4,000 4,000

Printing of advertising materials 812 812

Advertising in Middleton Journal 3,080 3,080

Travel expenses other than

depreciation of autos 2,890 3,439

Cost of exhibit 14,980

Depreciation of company cars 9,930 201,943 9,930 220,731

Net income $11,672 $32,944

Increase in net income = $21,272 ($32,944 - $11,672)