Question
Make adjustments to the following Income Statement according to the scenario given: A new competitor has entered the local market. In terms of Revenue, your
Make adjustments to the following Income Statement according to the scenario given:
A new competitor has entered the local market. In terms of Revenue, your current market share is 40%. If nothing is done the competitor could reduce market share to 25%. Management decides to launch a new ad campaign that will cost a total of 1% of current Revenue, and is expected to keep market share at 35%.
The ad campaign is considered Overhead, will begin November 1 of this year, and is to be paid in full the month it is launched. Assuming the lost market share will increase to 35% a month after the ad campaign starts, and COGS changes in proportion to Revenue.
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