Edwards & Shaw is a merchandising company that is the sole distributor of a product that is increasing in popularity. The companys income statement for the three most recent months is listed below.

Edwards and Shaw

Income Statement

For the Three Months Ending September

	July	August	September
Sales in Units	4,500	5,000	6,000
Sales Revenue	$675,000	$750,000	$900,000
Cost of Goods Sold	275,000	300,000	350,000
Gross Margin	400,000	450,000	550,000
Operating Expenses:
Advertising Expense	11,000	11,000	11,000
Shipping Expense	27,000	30,000	36,000
Salaries and Commissions	127,500	135,000	150,000
Legal Expense	7,000	7,000	7,000
Depreciation Expense	10,000	10,000	10,000
Total Operating Expenses	182,500	193,000	214,000
Operating Income	$217,500	$257,000	$336,000

Edwards and Shaw are considering a multimedia advertising campaign that should increase sales by $50,000 per month. The ad campaign will cost an additional $1,500 per month and will be considered a fixed cost. How will the ad campaign affect product cost? How will the increase in fixed costs affect the break-even point? Explain.