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    Incremental Analysis

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    (3) Exercise 7-4 / Incremental Analysis
    Rustic Interiors, 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 Middleton Home and Garden Expo. The exhibit will cost the company $13,000 for space. At the show, Rustic Interiors will present a slide show on a PC, pass out brochures that were printed previously (the company printed more that needed), and show its portfolio of previous jobs.

    The company estimates that revenue will increase by $40,000 over the next year as a result of the exhibit. For the previous year, profit was as follows:

    >>> (Please see the attached screen shot for the details.) <<<

    Calculate the impact of the exhibit on company profit. Should the company exhibit at the home show?

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    Solution Preview

    We need to look at the incremental revenue and incremental costs to make the decision.
    As given, the expected incremental revenue is $40,000
    The incremental costs are
    Cost of space ...

    Solution Summary

    The solution explains how to do a incremental analysis and determine the impact on profits.