Devry University – Keller Graduate School of Management
AC 505 Management Accounting
Professor Claudio BarBosa
April 13, 2010
7. In scenario 1 we realize that an increase in advertising of 10 million (G&AD co, would increase from 436 million to 446 million), and an increase of 3 % of sales (3%*1686 +1686 = 1736) .Cost of sales are 1736*55.1%=956million Euros. In scenario 2 advertising would also increase 10 million Euros (G&AD co would increase from 436 million to 446 million), sales commissions would increase 6% (variable sales costs would increase from104million to 205 million “1686 *6%+104=205”) and sales would increase by 5% “1686 *5%+1686=1770”.Cost of sales are 1770 *55.1%=975 million Euros. Benetton groups would be better off using the first scenario because it would generate 135 million Euros in net income, versus using the second scenario which would only generate 48 million Euros in net income.
8. When looking at each sector individually we realize that case facts indicated an increase in sales in casual sector to 1554 million Euros and a decrease in sales in the sportswear & equipment sector to 45million Euros, also a decrease in sales in the manufacturing and other sector to 87 million.
The casual sector income from operations would increase to 236 million Euros meanwhile sports sector would incur a loss of 7 million Euros ,while manufacturing & other sector would generate a 2 million Euros in income from operations .The total income from operations would mount up to “ 236+(7)+2= 231 million Euros. Increasing sales to 1554 million Euros at casual sector , decreasing sales at sports sector to 45 million Euros ,and decreasing sales to 87 million Euros at the manufacturing & other sector would increase income from operations by 14 million Euros ,to be exact from 217 million Euros to 231 million Euros “233+(7)+2=231 – 217=14millions”...