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5. Refer to the original data. Assume that the company sold 18,000 units last year. The sales manager is convinced that a 10% reduction in
5. Refer to the original data. Assume that the company sold 18,000 units last year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $30,000 increase in advertising would increase annual unit sales by one-third a. Prepare two contribution format income statements, one showing the results of last year's operations and one showing the results of operations if these changes are made. (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.) Feather Friends, Inc., Contribution Income Statement Proposed 24,000 units Last Year 18,000 units Total Per Unit Total Per Unit Sales $ 360,000$ 20.00 432,000$ ariable expenses Contribution margin 18.00 8.00 10.00 144,000 216,000 180,000 36,000 192,000 240,000 210,000 30,000 8.00 12.00 ixed expenses Net operating income b. Would you recommend that the company do as the sales manager suggests? es 6. Refer to the original data. Assume again that the company sold 18,000 units last year. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1 per unit. He thinks that this move, combined with some increase in advertising, would increase annual sales by 25%. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement, use the incremental analysis approach. The amount by which advertising can be increased is
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