3. ABC Company manufactures the product XE-17. The product is sold at a unit price of $70. Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year. Required :

d. The manager of ABC company predicts that by spending an additional $80,000 per year on advertising and using higher quality raw material (which will in turn increase the raw material cost per unit by $3), and increasing selling price per unit by 2% (to compensate for the increased costs), unit sales will increase by two- thirds of the current sales units. Should the company go with the managers proposed plan? Explain your answer. (Assume that in the current year, the company sold 5,600 units of XE-17) (8 marks)