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(disadvantage) of spending the additional money on advertising Assume that each year a company normally produces and sells 80,000 units of its only product for
(disadvantage) of spending the additional money on advertising
Assume that each year a company normally produces and sells 80,000 units of its only product for $40 per unit. The company's average unit costs at this level of activity are given below: $ 9.50 10.00 2.80 5.00 1.70 4.50 Direct materials Direct labor variable manufacturing overhead Fixed manufacturing overhead variable selling expenses Fixed selling expenses Total cost per unit $ 33.50 The company's relevant range of production is 70,000 - 100,000 units. It believes that spending an additional $140,000 on advertising would increase unit sales by 25%. What is the financial advantage (disadvantage) of spending the additional money on advertising?
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