Question
A company deals in two types of products A and B. The accounting department has prepared a detailed profit and loss statement as follows Items
A company deals in two types of products A and B. The accounting department has prepared a detailed profit and loss statement as follows
Items | The company | product A | product B | |||
Revenue | 600,000 | 100% | 400,000 | 100% | 200,000 | 100% |
Variable cost | 360,000 | 60% | 260,000 | 65% | 100,000 | 50% |
Contribution margin | 240,000 | 40% | 140,000 | 35% | 100,000 | 50% |
Direct cost | 72,000 | 12% | 20,000 | 5% | 52,000 | 26% |
Interest | 168,000 | 28% | 120,000 | 30% | 48,000 | 24% |
General fixed cost | 18,000 | 3% |
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Net income | 150,000 | 25% |
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The company plans to run an advertising service campaign for either product in the near future. Expected interruption cost 8,000,000. Marketing research shows that campaign ads will increase product A sales by 70,000,000 or increase product B sales by 60,000,000.
In your opinion, which product should the company advertise for?
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