FORECASTING SALES AT ALCORNS BOUTIQUE Jane Alcorn had sold items on eBay for several years but felt it was time to open a retail store. After thinking about the options and competition, she decided to open a shop specializing in womens clothing. Sales were slow for her first few months and she began to wonder how much she should be spending on advertising. So, she decided to keep track of the monthly amount spent on advertising and the monthly sales as shown. Case Study $0$0 $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $500$1,000$1,500$2,000$2,500$3,000 Monthly Sales at Alcorns Boutique Advertising Sales 1. 2. Ah, Alcorn thought, this is easy. If you increase advertising from $800 up to $2000, then sales go up from $10,500 to $16,500. So an increase in advertising expenses of $1200 results in an increase in sales of $6000, at least during the first months her business was open. Her gross profit margin on the fashion goods she carried in her tiny boutique was 50%. Find the increased gross profit by multiplying the 50% by the increase in sales. 2. 3. Therefore, an increase in advertising of $1200 results in $3000 more gross profit. Given this information, Alcorns first thought was to borrow $5000 from a bank and advertise a lot. Then she began to wonder. What suggestions do you have for her? Should she borrow $5000 and advertise? Why or why not (based on your intuition)?