Question

Runner 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 $14,990 for space. At the show, Runner 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 $40,020 over the next year as a result of the exhibit. For the previous year, profit was as follows:

Revenue					$213,151
Less:
	Design supplies		$17,922
	Salary of Samantha Spade (owner)		81,323
	Salary of Kim Bridesdale (full-time employee)		55,550
	Rent		18,912
	Utilities		6,810
	Depreciation of office equipment		3,660
	Printing of advertising materials		871
	Advertising in Middleton Journal		2,740
	Travel expenses other than depreciation of autos		3,140
	Depreciation of company cars		10,330		201,258
Net income					$11,893

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 Increase or Decrease? By____________

Should the company exhibit at the home show?

The company Should or Should not? exhibit at the home show.

Answer 1

The exhibit will cost the company $14,990 for space.

.

The company estimates that revenue will increase by $40,020 over the next year as a result of the exhibit. For the previous year, profit was as follows:

Revenue				$213,151
Less:
	Design supplies		$17,922
	Salary of Samantha Spade (owner)		81,323
	Salary of Kim Bridesdale (full-time employee)		55,550
	Rent		18,912
	Utilities		6,810
	Depreciation of office equipment		3,660
	Printing of advertising materials		871
	Advertising in Middleton Journal		2,740
	Travel expenses other than depreciation of autos		3,140
	Depreciation of company cars		10,330	201,258
Net income				$11,893

.

Calculate the impact of the exhibit on company profit.

.

If the revenue increase, the same proportion the variable cost are increase

Change in revenue = $40020

Now the revenue = 213151 + 40020 = 253171

So the increased variable cost are

Design supplies = 17922 is for revenue of $213,151, so for revenue of $253171 = 17922 / 213151 * 253171 = 21387

Increase in Design supplies = 21387 - 17922 = $3465

Travel expenses = 3140 / 213151 * 253171 = 3730

Increase in Travel expenses  = 3730 - 3140 = $590

The exhibit will cost the company = $14,990

Total cost increase = $3465 + $590 + $14,990 = $19045

.

Net change in income = Change in revenue - Total cost increase

Net change in income = $40020 - $19045 = $20975

.

Company profit will Increase By $20975

.

>>Should the company exhibit at the home show?

.

The company Should exhibit at the home show

.

Because it increase the net profit of company