Feather Friends, Inc , distributes a high quality wooden birdhouse that sells for $120 per unit Variable expenses are $60 00 per unit, and fixed expenses total $180,000 per year Refer to the original data Assume that the company sold 34,500 units last year The sales manager is convinced that a 11 reduction in the selling price, combined with a $64,000 increase in advertising, would increase annual unit sales by 50 Sales $ 3,240,000 Variable expenses 1,620,000 Contribution margin 1,620,000 Fixed expenses 180,000 Net operating income $ 1,440,000 Refer to the original data Assume again that the company sold 34,500 units last year The president does not want to change the selling price Instead, he wants to increase the sales commission by $2 20 per unit He thinks that this move, combined with some increase in advertising, would double annual unit sales By how much could advertising be increased with profits remaining unchanged Do not prepare an income statement use the incremental analysis approach

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Posted on Oct 01, 2024

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year.

Refer to the original data. Assume that the company sold 34,500 units last year. The sales manager is convinced that a 11% reduction in the selling price, combined with a $64,000 increase in advertising, would increase annual unit sales by 50%.


Sales	$	3,240,000
Variable expenses		1,620,000

Contribution margin		1,620,000
Fixed expenses		180,000

Net operating income	$	1,440,000

. Refer to the original data. Assume again that the company sold 34,500 units last year. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.20 per unit. He thinks that this move, combined with some increase in advertising, would double annual unit sales. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach.