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A company is planning a one-month campaign for the month to promote sales of two products. A total of A$140,000 has been budgeted for advertising,

A company is planning a one-month campaign for the month to promote sales of two products. A total of A$140,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activity. Below data has been assembled for possible usefulness in deciding which products to select for the campaign.

Moisturizer Perfume

Unitselling price $55.00 $60.00

Unit production cost:

Direct materials $9 $14

Direct labor 3 5

Variable overhead 3 5

Fixed overhead 6 4

Total unit production cost $21 $28

Unit variable selling expense 16 15

Unit fixed selling expense 12 6

Total unit costs $49 $49

Operating income per unit $6 $11

No increase in facilities are necessary to produce and sell the increased output. Anticipate that 22,000 additional units of moisturizer or 20,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either.

  • how would I make a differential analysis to figure out whether to promote moisturizer ( alternative 1) or perfume (alternative 2)
  • if I decided to promote perfume, estimating operation income would be increased by $80,000 ($11 operating incomer per unit for 20,000 units less promotion expenses of $140,000) I also believe that the selection of moisturizer would reduce operating income by $8,000 ($6 operating income per unit for 22,000 units less promotion expenses of $140,000)

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