# 15-15 - 15-1515-28(continued(3(continued)Spending \$3,000 on...

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Unformatted text preview: 15-1515-28 (continued)(3) (continued)Spending \$3,000 on advertising sheet music alone increases sales ofsheet music by 1,100 units and increases profit by \$4,700. The next\$1,000 spent on sheet music increases sales by only 100 more units.The resulting change in profit is:Increase in contribution margin (100 units @ \$7) \$ 700Increase in advertising cost (1,000)Decrease in profit \$ (300)Thus, spending the last \$1,000 on advertising causes the increase inprofit to decrease from \$4,700 to \$4,400.(4) To: Mr Hill(Your boss' name)From: (Your name)RE: Additional advertisingDetermining how much advertising to spend on each additional product inorder to increase profit by the greatest amount requires computing theincrease in profit from each additional \$1,000 spent on each product.The profit changes are shown below....
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