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The Food division of Garcia Company reports the following for the current year. Sales $ 4,030,000 Cost of goods sold 2,720,000 Gross profit 1,310,000 Expenses
The Food division of Garcia Company reports the following for the current year. Sales $ 4,030,000 Cost of goods sold 2,720,000 Gross profit 1,310,000 Expenses 1,147,000 Income $ 163,000 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 $620,000. Cost of goods sold will not change. Strategy 2: Develop a more efficient manufacturing process. This will decrease cost of goods sold by $119,100. 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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