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OTHC Company produces and sells three products. Information about these products for the month of July is given below: Product R Product E selling price
OTHC Company produces and sells three products. Information about these products for the month of July is given below: Product R Product E selling price per unit $31 $23 variable costs per unit $19 $12 number of units sold 19,400 17,300 Product M selling price per unit $36 variable costs per unit $17 number of units sold 28,200 OTHC Company had total fixed costs of $416,000 in July. OTHC Company is considering investing in an advertising campaign that will double the sales volume of Product E. It is the goal of the company to increase the net income in August by 10% over the net income from July. Assume the sales of Product R are expected to decrease by 20% as some customers currently buying Product R will switch to Product E instead. Assume the sales of Product M will not be impacted by the advertising campaign Calculate the maximum amount that can be spent on the advertising campaign and still enable OTHC Company to meet its profit goal for August.
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