Unifying Concepts: Production and Advertising 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, the company 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 it advertise?

Transcribed Image Text:

Charger Tester Selling price per unit $70 $90 Variable cost per unit $30 $40 Fixed cost per unit. $30 $40 Production time per unit (in hours) 2 4