SAVANNAH DESIGNS CVP PROBLEM

Savannah owns a company called Savannah Designs, which makes bracelets with semiprecious stones and sells them at a local market. Savannah currently sells her bracelets for $175 each and expects to sell 1,000 bracelets per year at this price. Her variable costs per bracelet are the metal and stones (approximately $80 per bracelet) and packaging ($5 per bracelet). She has total annual fixed costs of $9,000, comprised of $8,500 for space at the market and $500 depreciation on display cases and signage.

Savannah estimates that if she spends $10,000 in advertising per year, she will sell twice as many bracelets per year. If she wants to maximize expected profit, should Savannah spend $10,000 in advertising per year?

Question 10 options:

	Yes, Savannah Designs should spend $10,000 in advertising.
	No, Savannah Designs should not spend $10,000 in advertising.