Mammoth Manufacturing Ltd manufactures two models of ballpoint pens, the classic and the economy. Both products have proved to be popular in government schools. In the past year, the following data apply these two products, Page 1002 Per unit Classic Economy Selling price $4.00 $3.00 Variable manufacturing cost 2.00 1.50 Fixed manufacturing cost 0.75 0.20 Variable selling cost 1.00 1.00 * Foxed manufacturing cost is applied at a rate of $1.00 per machine hour. The sales manager has had a $160 000 increase in her budget allotment for advertising, and she wants to apply the money to the most profitable product. She is hoping to open up new markets in the private school sector. Customers do not consider the two products to be substitutes for each other. (Ignore income taxes.) Required: 1. Suppose the sales manager decides to spend the entire $160 000 on advertising the classic model. What is the minimum increase needed in sales units of the classic model to ensure that the total profit from the sales of the classic does not change? 2. Suppose the sales manager decides to spend the entire $160 000 on advertising the economy model. What is the minimum increase needed in sales units of the economy model to ensure that the total profit from the sales of the economy does not change? 3. Suppose Mammoth has only 100 000 machine hours of spare capacity available for the production of both products and it is possible that the increased demand for each of the two products created by the additional advertising may exceed production capacity. Given that the company wishes to maximise its profitability, which product should be advertised? What is the estimated increase in contribution margin earned? 4. Do the calculations that you have performed in requirements 1 to 3 of this problem provide sufficient information for the sales manager to allow her to make decisions about how the increased advertising budget allocation should be spent? If not provide some examples of other information that may be needed