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The Food division of Garcia Company reports the following for the current year. Sales $ 4,570,000 Cost of goods sold 2,990,000 Gross profit 1,580,000 Expenses
The Food division of Garcia Company reports the following for the current year. Sales $ 4,570,000 Cost of goods sold 2,990,000 Gross profit 1,580,000 Expenses 1,341,000 Income $ 239,000 Garcia wants to achieve at least a 10% profit margin next year. Two alternative strategies are proposed. Strategy 1: Increase advertising expenses by $225,000. The company expects this to increase sales by $790,000. Cost of goods sold will not change. Strategy 2: Develop a more efficient manufacturing process. This will decrease cost of goods sold by $126,600. For each strategy, compute the profit margin expected for next year. Which strategy should Garcia choose based on expected profit margin
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