As product marketing manager, one of our jobs is to prepare recommendations to the company's executive committee as to how advertising expenditures should be allocated. Last year's advertising budget of $40,000 was spent in equal increments over the four quarters of the year. Initial expectations are that we will repeat this plan in the coming year. However, the committee would like to know whether some other allocation would be advantageous and whether the total budget should be changed. Our product sells for $40 and costs us $25 to produce. Sales in the past have been seasonal, and our consultants have estimated seasonal adjustment factors for unit sales as follows{Q1: 90%, Q2: 110%, Q3: 80%, and Q4: 120%. In addition to product costs, we must take into account the cost of the sales force (projected to be $34,000 over the year, allocated as follows: Q1 and Q2, $8,000 each; Q3 and Q4, $9,000 each), the cost of advertising itself, and overhead (typically 15% of revenues). Quarterly unit sales seem to run around 4,000 units when advertising is around $10,000. Clearly, increasing advertising expenditures will increase demand, but there are limits to its impact. Our consultants several years ago estimated the relationship between advertising and demand. Converting that relationship to current conditions gives the following formula:

Q.) Assuming that quarterly advertising expenditures remain the same in each quarter throughout the year, use a one-way data table to determine the annual advertising expenditure that max- imizes the company's annual net income. Consider advertising expenditure values from $0 to $120,000 in increments of $5,000. Plot the results of your analysis on a line graph.

Quarterly Demand in Units =35 Seasonal Factor 3,000+Advertising Quarterly Demand in Units =35 Seasonal Factor 3,000+Advertising