3. Gobi Inc. has sales of $40,000,000. The contribution margin is 40% and the fixed costs are $3,000,000. The variable cost per unit is $12. The company is considering two different strategies for increasing their profits:
1. Spend $2,000,000 in advertising; the results is expected to increase the company’s sales by 25%
2. Reduce the price by 20%; the price-demand elasticity is -3.0
Which of the two strategies will generate the highest overall profits? Show all calculations!
Recently Asked Questions
- Which of the following is at least likely an activity in the revenue and receipt cycle ?
- Seller offers to sell to Buyer 1,000 widgets at $ 5 each . Buyer responds in writing , stating that Buyer accepts the offer , but at a reduced price of $ 4.95
- Q . 50 in B You are considering investing in the following four commercial MBSs CMBS : A , B , C , and D . The debt-to-service coverage ratios DSC for A and B