Question 2: Should you reduce the price or increase advertising? MENUTES ASK TO The selling price is $30/unit, variable costs are $20/unit, and fixed costs are $3,000 in total. Sales volume decreased to 200 units because of a recession. You are considering two options to stimulate sales: (1) Reduce the price to $28/unit. This will increase sales volume by 20%. (2) Buy additional advertising for $300 and keep the original price. This will increase sales volume by 20%. Use the gross approach to decide whether you should do nothing (the status quo), reduce the price, or increase advertising. Volume in units Revenue $ Variable costs $ Contribution margin $ Fixed costs Profit $ $ status quo (1) reduce the price $ $ $ $ (2) increase advertising $ $ $ $ $ enter losses as a negative number: e.g., a loss of $500 should be entered as -500, not as (500) or ($500). What should you do? O Do nothing O Increase advertising O Reduce the price