In Problem 35, Cynthia’s Cookies must decide between two improvement options. Option 1 is spending $10,000 on a new online marketing campaign that is expected to increase last year’s sales (units) by 20 percent. Option 2 is to reduce variable costs by 10 percent by spending $10,000 on equipment and process improvements. For Option 2, sales remain at 8,200 boxes. (The assumption here is that each option is equally costly to implement.) What option provides the higher profits?

Data from in problem 35

The selling price per box for Cynthia’s Cookies is $19.95. Fixed costs are $65,000 and the variable cost per box is $9.88.