Shown as follows is a segmented income statement for DrexelHall during the current month:
All stores are similar in size, carry similar products, and operate in similar neighborhoods. Store was established first and was built at a lower cost than were Stores and
This lower cost results in less depreciation expense for Store Store follows a policy of minimizing both costs and sales prices. Store follows a policy of providing
extensive customer service and charges slightly higher prices than the other two stores.
The marketing manager of DrexelHall is considering two alternative advertising strategies, each of which would cost $ per month. One strategy is to advertise the
name DrexelHall, which is expected to increase the monthly sales at all stores by percent. The other strategy is to emphasize the low prices available at Store which is
expected to increase monthly sales at Store by $ but to reduce sales by $ per month at Stores and
Determine the expected effect of each strategy on the company's overall income from operations.
