Eventually, this process would see a decrease in profit, since there would be no longer same selling Jewelry incentive as before when the staff was paid in commissions. Therefore we strongly recommend to management to maintain selling commissions to to allow for an increased motivation, which would see an increased in the profit. Question 4 Without Advertising Increase With Advertising Increase Sales/Unit vaunt $5,211 7,895 Increasing fixed costs (advertising) by $200,000 increases the breakable point by $200,000. I would recommend some increased advertising but perhaps not as drastic as nearly doubling their advertising spending. They are a known and established ‘new, bigger and better’ store is likely to increase sales.
Question 5 Because the fixed cost of year 2007 remained the same as it was in year 2006, therefore, we need to calculate the fixed cost in year 2007 firstly: Fixed Cost: 5,01 1 ,OHO Then, we assume x is the amount that the average sales ticket have to increase to breakable. Therefore, 6897($1 ,oho 6897($1 ,553+X) = $1 ($1 ,553+X) = $1,611. 86 $58. 86 As a result, the average sales ticket have to increase $58. 6 to breakable. Question 6 As proven in question 4, I would recommend them to spend more on advertising because it increased their profit. Spending more on advertising would be better than spending on commission expense. What is more, Hallstead Jeweler’s needs to expand the sales to cover its increased costs and make profits. Marketing strategies are important, and using advertisements may be a good way to attract more new customers. Also, proper discount will draw people’s attention as well.
Furthermore, Our recommendation for the managers at Hallstead is to maintain their investment n advertising to spread the location of their new store and to attract larger clientele since their new location has seen an increase in sales and this strategy would allow the managers to increase their profit. However, we wouldn’t recommend cutting costs anywhere, I believe their best option is to strive to increase sales. One option which is mentioned above would to spend the $200,000 on advertising. It would also be a good idea to look into expanding into online sales like their competitors. Another recommendation for Hallstead Jeweler’s would be decrease the sales commissions in order to make more profits than before.