Question
Stratford Company distributes a lightweight lawn chair that sells for $60 per unit. Variable expenses are 40% of sales, and fixed expenses total $777,600 annually.
Stratford Company distributes a lightweight lawn chair that sells for $60 per unit. Variable expenses are 40% of sales, and fixed expenses total $777,600 annually. Assume again that the company sold 38,000 units last year. The president feels that it would be unwise to change the selling price. Instead, she wants to increase the sales commission by $2 per unit. She thinks that this move, combined with some increase in advertising, would double annual unit sales. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach.
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