1.Goodman Dry Cleaners is a successful and profitable small business, as indicted by the average financial data for a typical month of operation:

Because it is now Spring, Goodman is considering running a promotion on comforters, winter coats, and other bulky items. During the month of March, Goodman plans to reduce the charge for cleaning each of these bulky items from $9 to $6. Goodman plans to spend $1,000 advertising the promotion in print media with a few spots on Channel 15 (the station that replays local news all day long). The owner of Goodman thinks the promotion would increase Marchs sales by 1,500 winter items. Goodmans average monthly revenue on bulky items during a typical month amounts to $4,500.

1a) Determine how much Goodmans profits would increase or decrease form the promotion.

1b) Determine how much Goodman could spend on advertising and still breakeven on the promotion.

Revenue Variable cost Contribution margin Fixed costs Profit $30,000 12,000 18,000 10,000 $ 8,000