| for this 1st part of the CLA2 please explain the initial problem and all assumptions then provide soulution and explain your work in detail and for both parts of CLA2 please provide at least 5 referrences these referrences 1 should be from the textbook as source of the data |
| | | | | Guitar | Piano | Combine |
| | | | sales | $ 370,500 | $ 279,500 | $ 650,000 | | | all given values in the black letter are found values in red letter |
| | | | cost of goods sold | $ 320,000 | $ 175,000 | $ 495,000 |
| | | | Gross profitc= sales - cost of goods sold | $ 50,500 | $ 104,500 | $ 155,000 |
| | | | Direct expenses | | | | | | Advertising | Salaries | Office Expenses |
| | | | salaries | $ 35,000 | $ 25,000 | $ 60,000 | | Allocation Base | sales | number of employees | Square Footage |
| | | | maintenance | $ 12,000 | $ 10,000 | $ 22,000 |
| | | | utilities | $ 5,000 | $ 4,500 | $ 9,500 | | | Guitar | Piano |
| | | | insurance | $ 4,200 | $ 3,700 | $ 7,900 | | Number of Employess | 3 | 2 |
| | | | Direct Expenses | $ 56,200 | $ 43,200 | $ 99,400 | | Square Footage | 5000 | 3500 |
| | | | Indirect Expenses |
| | | | Advertising | $ 8,550 | $ 6,450 | $ 15,000 |
| | | | Salaries | $ 16,200 | $ 10,800 | $ 27,000 |
| | | | Office Expenses | $ 1,882.35 | $ 1,317.65 | $ 3,200 |
| | | | Indirect Expenses | $ 26,632 | $ 18,568 | $ 45,200 |
| | | | Operating Income | $ (32,332) | $ 42,732 | $ 10,400 |
| | | | reduced revenues vs reduced cost trade off analysis to see if closing Guitar department is the right decision |
| | | | reduced revenues | $ 370,500 |
| | | | reduced costs (except indirect costs) |
| | | | Reduction in costs of goods | $ 320,000 |
| | | | Reduction in Direct Expenses | $ 56,200 |
| | | | reduced costs (except indirect costs) | $ 376,200 |
| | | | reduction in costs , excluding the redcution in Indirect costs , exceeds reduction in revenues so, taking into account that there will be more reduction in costs due to reduction in indirect costs we observe that reduction in costs exceeds reduction in revenues |
| | | | therefore from striclty financial view point closing Guitar department is justfiied |
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CLA2GuidePart1.xlsx
