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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
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Trans Sport Company sells sporting goods to retailers in three different states—Florida,
Â
|
Georgia, and Tennessee. company: |
The |
following profit |
analysis by state |
was |
prepared by  the |
|
 |
 |
Florida |
Georgia |
 |
Tennessee |
|
Revenue |
 |
$1,125,000 |
$1,000,000 |
 |
$1,181,250 |
|
Cost of goods sold |
 |
    562,500 |
    535,000 |
 |
    562,500 |
|
Gross profit |
 |
$ Â 562,500 |
$ Â 465,000 |
 |
$ Â 618,750 |
|
Selling expenses |
 |
    365,600 |
     337,500 |
 |
    420,000 |
|
Income from operations |
 |
$ Â 196,900 |
$Â Â 127,500 |
 |
$ Â 198,750 |
Â
Â
Â
The following fixed costs have also been   provided:
Â
Â
Â
|
 |
Florida |
Georgia |
Tennessee |
|
Fixed manufacturing costs |
$112,500 |
$225,000 |
$126,500 |
|
Fixed selling expenses |
84,375 |
135,000 |
113,625 |
Â
In addition, assume that inventories have been   negligible.
Â
Management believes it could increase state sales by 20%, without increasing any of the fixed costs, by spending an additional $42,200 per state on advertising.
Â
1.    Prepare a contribution margin by state report for Trans Sport Company.
Â
2.    Determine how much state operating profit will be generated for an additional $42,200 per state on advertising.
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3.   Â
Which state will provide the greatest profit return for a $42,200 increase in advertising? Why?
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