Question

expects to sell 82,000 pencils next quarter. At this level of sales, variable expenses will total $184,500 and fixed expenses will total $242,130. The marketing department forecasts that sales volume will increase by 40% next quarter if ABC changes the name on the package to Super Size Pencils. This change will not affect the cost structure for the pencils. What will be the dollar amount change in operating income if ABC implements the name change?

Answer 1

Answer:

The below piece of information is missing:

If Acme wants to make $160,125 in profit next quarter, what will total sales in next quarter?

Dollar amount of change in operating income is $160,902.00

Explanation:

sales if $160,125 in profit is expected=variable expenses+fixed expenses+target operating income

variable expenses is $184,500

fixed expenses is $242,130

sales=$184,500+$242,130+$160,125

sales amount= $586,755

Implementation change means that sales rises by 40% and by implication variable expenses would rise by the same %

let operating income by x

$586,755*(1+40%)=$184,500*(1+40%)+$242,130+x

x=$586,755*(1+40%)-$184,500*(1+40%)-$242,130

x=$821457 -$258300 -$242,130

x=$ 321,027.00  

The change in operating income=$ 321,027.00-$160,125.00=$160,902.00