Cole Company manufactures only two products'a battery charger and a testing machine for automobile engines. An average
Question:
Cole Company manufactures only two products'a battery charger and a testing machine for automobile engines. An average of 30,000 chargers and 50,000 testers are sold each year. This year, Cole can afford only $60,000 for advertising the products, which is just enough to advertise one product effectively. The marketing manager expects that the sales of chargers will increase by 20% if they are advertised and that the sales of testers will increase by 10% if they are advertised. The following information about the two products has been provided by the accountant:
Required:
1. If Cole had an unlimited number of labor hours, would you recommend that it advertise either of its products? If yes, which one and why?
2. Assume that Cole has a capacity of 260,000 labor hours. Should Cole still advertise? If so, which product should itadvertise?
Tester Charger Selling price per unit Variable cost per unit. Fixed cost per unit. Production time per unit lin hours) $90 $40 $40 4 $70 S30 S30 2
Step by Step Answer:
1 Cole Company should advertise because the additional contribution from advertising either product is higher than the 60000 advertising cost With no ...View the full answer
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
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