WSR Inc
WSR Inc WSR’s Management Is Considering a Special Advertising Campaign That Will

question 70

Multiple Choice

WSR Inc.
WSR Inc. sells a variety of drink and food products including potato chips and soft drink. The segmented income statements for these two products are as follows:
$\begin{array}{lrr}&\underline{\text { Soft drink}}&\underline{\text { Chips}}\\\text { Sales } & \$ 800000 & \$ 900000 \\\text { Variable expenses } &\underline{ 200000} &\underline{ 315000} \\\text { Contribution margin } & 600000 & 585000 \\\text { Traceable fixed expense } & \underline{120000} & \underline{160000} \\\text { Segment margin } & \underline{\$ 480000} & \underline{\$ 425000}\end{array}$
WSR’s management is considering a special advertising campaign that will run during a major sporting event. The advertising campaign is expected to cost $30 000 and only one product can be featured. In-house marketing studies show that the campaign could increase sales of the soft drink division by $200 000 or increase sales of the chips division by $275 000.

-What will be the overall net effect on the company's total profits if the advertising focuses on soft drink?

• A) Increase of $170 000
• B) Increase of $150 000
• C) Increase of $120 000
• D) Increase of $200 000

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Definitions:

Promisee

The person to whom a promise or agreement is made, especially in a contract.

Age of Majority

The legal age at which an individual is considered an adult and capable of making legal decisions for themselves, such as entering into contracts and voting, varying by jurisdiction.

New Consideration

Additional or different consideration offered in a contract, beyond what was initially agreed upon, often required for the enforcement of modifications or new agreements.

Doubled Production

A situation or outcome where the output or production of goods or services has increased by 100 percent.