a. Currently, all store managers have contracts calling for a bonus of 20 cents per gallon for each gallon sold beyond the break-even point. Compute the number of gallons of ice cream that must be sold per month in order to earn a monthly operating income of $10,000 (round to the nearest gallon.)

Giving out a $0.20 per gallon bonus, once they have reached the breakeven point, lowers the contribution margin on the additional sales to $7.80 per gallon. The calculation of the additional gallons sold to achieve a $10,000 profit is:

$10,000 / $7.80 = 1,282

1,282 + 1,500 = 2,782 gallons that must be sold to achieve an operating income of $10,000

b. To increase operating income, the company is considering the following two alternatives:

1. Reduce the selling price by an average of $2.00 per gallon. This action is expected to increase the number of gallons sold by 20%. (Under this plan, the manager would be paid a salary of $2,500 without receiving a bonus.)

The thing that makes this problem hard is the fact that they don’t tell you what original sales volume number to use to base the calculations on. So I had to make a guess here, and used the 2,782 gallons they need to sell to earn the $10,000 of operating income.

Under this scenario the contribution margin goes down to $6.00 per gallon sold.

While Fixed costs stay the same at $12,000.

Assuming that the starting number of gallons sold was the 2,782 calculated in the first part, the new number of gallons sold would be 2,782 X 1.20 = 3,338 gallons per month.

Net Profit under this scenario would be:

(3,338 X 6.00) - $12,000 = $8,028

This is a reduction of $1,972 from the $10,000 they earned on the original plan.

2. Spend $3,000 per month on advertising without any change in selling price. This action is expected to increase the number of gallons sold by 10%. (Under this plan, the manager would be paid a salary of $2,500 without receiving a bonus.)

Under this scenario the contribution margin stays the same at $8.00 per gallon sold.

Fixed costs, though, increase to $15,000. ($12,000 + $3,000)

Assuming that the starting number of gallons sold was the 2,782 calculated in the first part, the new number of gallons sold would be 2,782 X 1.10 = 3,060 gallons per month.

Net Profit under this scenario would be:

(3,060 X 8.00) - $15,000 = $9,480

This is a reduction of $520 from the $10,000 they earned on the original plan, but a $1,452 improvement from the other option they are considering

c. Draft a short memo to management indicating your recommendations with respect to these alternative marketing strategies.

You’ll have to write this yourself, but while neither scenario looks good; the second one looks less bad than the first. If it were me, I would recommend that they enact neither of the two choices as both result in a lower profit margin than they already earn
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35 years of accounting experience

Those are the direct costs but many estimate the true amount to be 3-4 times that amount due to future costs for the VA, replacement of national guard/reserve equipment, and other future expenses..
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http://www.costofwar.com

We are very close to the trillion dollar mark.
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thats where the money is , no tax , no electric , no wages , BIG BIG MONEY JUST GETTING THROWN AT YOU ALL DAY EVERY DAY

http://www.betdaq.com/UI/?h=1

http://www.betbull.com/UI/Default.aspx

IM ON 3 GRAND A WEEK FOR SITTIN ON MY ASS AT HOME GETTIN HIGH, LISTENING TO MUSIC

IM JUST A SMALL FISH

THE CLEVER ONES ARE ON 15 GRAND A DAY
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That way the rest of us get out of paying taxes for you to cheat your way through life AND you start paying something towards taxes…
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I also can’t believe that people believe that George W. Bush is trying to make his father proud or something. That’s just complete crap.
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