The Stratford Company distributes a lightweight lawn chair that sells for $15 per unit. Variable costs are
Question:
The Stratford Company distributes a lightweight lawn chair that sells for $15 per unit. Variable costs are 6.00 per unit and fixed costs are 180.000 annually. Last year's results are as follows:
Sales (24,000 units 360,000
Variable expenses 144,000
Contribution margin 216,000
Fixed expenses. 180.000
Operating Income 36,000
The president thinks it would be unwise to change the selling price. instead, it wants to increase its sales commission by $2 per unit. He expects this move, combined with some increase in ads, to increase sales to 48,000 units, compared to 24,000 last year.
How much can advertising be increased while profit remains unchanged? Use the incremental analysis method.
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer