Hi class,

I think the business will benefit more with a salesperson eliminated. The strategy to reduce budgeting amount on advertising could affect the ability to bring in new customers to the business which would hurt overall sales, so I think it's important to keep the budget for advertising, to help bring in customers to buy.

Gross margin = $1,000,000 x 48/148 = $324,324

Selling Salaries Reduced:

Wrapping and packing: $10,000

Receiving and making $15,000

Buying salaries = $125,000

= $150,000

Net profit: $324,324 - $150,000 = $174,324

Selling Salaries: $275,000 - $50,000 = $225,000

Advertising: $90,000

= $315,000

Net loss: $174,324 - $315,000 = (-$140,676)

Advertising Budget Reduced:

Wrapping & Packing + Receiving & Making + Buying Salaries

$10,000 + $15,000 + $125,000 = $150,000

324,324 - 150,000 = 174,324

Net profit = $174,324

Selling salaries + Advertising

275,000 + 50,000 = 325,000

Net loss = (-$150,076)

In response to your peers, compare your chosen strategy. Is there another option that you as a manager could make that would effectively increase profits?

what your point of view of the statement