Based on current forecasts, it is expected that Barnes will sell 300,000 tricycles in the upcoming fiscal year, resulting in the following forecasted income statement:

Cost of goods sold has been estimated by assuming the following costs for each product cost component:direct materials of $14/unit, direct labor of $11/unit, variable manufacturing overhead of $9/unit, and fixed manufacturing overhead of $6/unit. The tricycle product line manager believes that with a well-executed targeted advertising campaign, they should be able to increase units sold by 3%.

Determine, the maximum amount that Barnes should be willing to pay for the advertising campaign.

Revenue $16,500,000 Cost of Goods Sold ($12,000,000) Gross Margin $4,500,000 Variable Selling ($1,200,000) Fixed SG&A ($1,500,000). Profit $1,800,000