Can you please show your work and answer all the question Th

Can you please show your work and answer all the question? Thank you

The Hollywood Hat Company produces a top hat, the Star Topper that sells for $130. Operating income for 2018 is as follows:

Sales revenue ($130)

$910,000

Variable cost ($60 per hat)

420,000

Contribution margin

490,000

Fixed cost

380,000

Operating income

$110,000

Hollywood Hat Company would like to increase its profitability over the next year by at least 20%. To do so, the company is considering the following options:

Replace a portion of its variable labor with an automated machining process. This would result in a 20% decrease in variable cost per unit but a 15% increase in fixed costs. Sales would remain the same.

Spend $50,000 on a new advertising campaign, which would increase sales by 10%.

Increase both selling price by $10 per unit and variable costs by $8 per unit by using a higher-quality silk material in the production of its hats. The higher-priced hat would cause demand to drop by approximately 10%.

Add a second manufacturing facility that would double Hollywood Hat’s fixed costs but would increase sales by 60%.

Required

a. Evaluate each of the alternatives considered by Hollywood Hat.

b. Do any of the options meet or exceed Hollywood Hat’s targeted increase in income of 20%?

c. What should Hollywood Hat do?

Your answer should address each requirement (remember to show your work) and your submission should be in one Word file.

Sales revenue ($130)	$910,000
Variable cost ($60 per hat)	420,000
Contribution margin	490,000
Fixed cost	380,000
Operating income	$110,000

Solution

a. Present Proposal 1 Proposal 2 Proposal 3 Proposal 4 Sales Volume 7000 7000 7700 6300 11200 Per unit Total Per unit Total Per unit Total Per unit Total Per unit Total Sales 130 910000 130 910000 130 1001000 140 882000 130 1456000 Variable cost 60 420000 48 336000 60 462000 68 428400 60 672000 Contribution margin 70 490000 82 574000 70 539000 72 453600 70 784000 Fixed costs 380000 437000 430000 380000 760000 Operating Income 110000 137000 109000 73600 24000 Working: 1. For proposal 1 :       Variable cost per unit will reduce by 20% . The new variable cost per unit will be $48.00 ($60 reduced by 20% of $60)       Fixed cost will go up by 15%. The new fixed cost will be $437,000 ($380,000 * 1.15%) 2. For proposal 2 :       Sales will increase by 10%. The new sales will be 110% of 7,000 units i.e., 7,700 units.       Fixed cost will go up by $50,000 due to advertising expense of $50,000. 3. For proposal 3 :       Increasing selling price by $10 per unit, the new selling price will be $140 and increasing variable by $8 ,       the new variable cost per unit will be $68. This will reduce the demand by 10% to 6,300 units (90% of 7,000) 4. For proposal 4 :       Add a second manufacturing facility , which will double the fixed costs to $760,000( 2 x $380,000)      and increase in sales by 60% , new sales will be 11,200 ( 160% of 7,000). b. Proposal 1 would meet the requirement of increasing net operating income by 20% .      Present operating income      = 110,000      20% increase                                  =22,000     Required operating income     =132,000     Operating income under proposal 1 = 137,000. c. Since the firt proposal is giving the desired increase in operating income , the company shall go ahead with the proposal.