Question

Infinity Designs, 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 Home and Garden Expo. The exhibit will cost the company $12,000 for space. At the show, Infinity Designs will present a slide show on a PC, pass out brochures that are printed previously, (the company printed more than needed), and show its portfolio of previous
jobs.
The company estimates that revenue will increase by $36,000 over the next year as a result of the exhibit. For the previous year, profit was as follows:

		Revenue					$201,000
		Less:
		Design supplies (variable cost)				$15,000
		Salary of Samantha Spade (owner)				80,000
		Salary of Kim Bridesdale (full time employee)				55,000
		Rent				18,000
		Utilities				6,000
		Depreciation of office equipment				3,600
		Printing of advertising materials				700
		Advertising in Middleton Journal				2,500
		Travel expenses other than depreciation of autos (variable cost)				$2,000
		Depreciation of company cars				9,000
Required:
Calculate the impact of the exhibit on company profit.

Round to two decimal places.

Answer 1

Impact of the exhibit on profit : $ 20,955.22 increase.

	Previous Year Results	Results with Exhibit	Impact of Exhibit on Profit
Revenue	$ 201,000	$ 237,000	$ 36,000
Expenses
Design Supplies	15,000	17,686.57	(2,686.57)
Salary of Samantha Spade	80,000	80,000	0
Salary of Kim Bridesdale	55,000	55,000	0
Rent	18,000	30,000	(12,000)
Utilities	6,000	6,000	0
Depreciation of office equipment	3,600	3,600	0
Printing of Advertising Materials	700	700	0
Advertising in Middleton Journal	2,500	2,500	0
Travel Expenses	2,000	2,358.21	(358.21)
Depreciation of company cars	9,000	9,000	0
Total Expenses	191,800	206,844.78	15,044.78
Profit	$ 9,200	$ 30,155.22	$ 20,955.22