Question
To boost their Komboucha sales, the owners of Reveal are thinking of investing $5,000 in an advertising campaign on Instagram. To maximize future brand recognition
To boost their Komboucha sales, the owners of Reveal are thinking of investing $5,000 in an advertising campaign on Instagram. To maximize future brand recognition by consumers, the marketing consultant recommends choosing only one product for this targeted ad campaign. He mentions that the advertising campaign would increase sales in the chosen product by 3%.
Three flavors of Kombucha are likely to be the focus of this campaign:
| Demand | Contribution margin per unit |
Rose Hibiscus | 62,000 units | $4.00 |
Peppermint | 59,000 units | $4.50 |
Lemongrass Clementine | 63,500 units | $3.80 |
Knowing that Reveal has excess capacity to meet an increase in demand, in which of the three products should the company invest?
Calculate the effect (increase or decrease) on operating income of investing in advertising the Rose Hibiscus flavor.
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