Friedas Fabulous Flower Fantasies

Friedas Fabulous Flower Fantasies sells flowers and other floral items. Her monthly income statement is reflected below. Frieda is not happy with her miniscule operating income.

Monthly

Sales (602 Customers @ $50) $30,100

Cost of Goods Sold 6,020

Gross Profit $24,080

Operating Expenses 24,020

Operating Income $ 60

Cost of Goods Sold is a variable cost. Also, another $6,020 of variable costs are included in the operating expenses. The remainder of the operating expenses is a fixed cost.

A Consultant has recommended that an extra $1,000 expenditure each month on promotional activities will double Friedas Sales. Friedas response:

Are you crazy? If I double my sales, my operating income will double from $60 to $120 each month. And I will have spent another $1,000. What kind of consulting school did you go to?

Required: Evaluate the Consultants recommendation and Friedas response. Clearly indicate what Frieda should do and justify your recommendation with an appropriate report or documentation.