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The brand manager for Ivory soap, manufactured by Procter & Gamble, was trying to increase the brand's profits which had recently been declining. The assistant
The brand manager for Ivory soap, manufactured by Procter & Gamble, was trying to increase the brand's profits which had recently been declining. The assistant brand manager had developed two alternatives to stimulate sales volume: Option A - increase advertising by $450,000 OPTION B - lower price by 15%. Ivory is typically sold in multipacks that contain 3, 4 or 10 bars. Figures below represent the per- bar prices and costs. Unit price Unit variable costs Unit contribution Unit Volume Ivory (per bar) $0.32 0.18 0.14 18,500,000 units a. If the brand manager chooses Option A, what absolute increase in unit sales will be necessary to recoup the incremental increase in advertising expenditures for Ivory? b. What absolute increase in unit sales will be necessary to maintain current profit levels if the price is reduced 15%? C. Which option should the brand manager choose? Why
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