Ben & Harry Co

question 166

Essay

Ben & Harry Co. sold 100,000 units last year with the following results:

a. Management thinks that a 5 percent reduction in the unit sales price and a $31,000 increase in fixed advertising costs will create a 30 percent increase in unit sales. Assess this proposal and make a recommendation on what action should be taken.
b. Assume that the marketing manager thinks that the unit sales price should not be changed. Instead, he recommends a $0.40 per unit increase in sales commissions coupled with some increase in advertising to generate the 30 percent increase in unit sales and a 20 percent increase in operating income. Assess this proposal and determine the maximum amount of money that can be spent on advertising if the targeted profit is to be achieved.

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Definitions:

Tour Boat

A boat designed specifically for taking tourists on sightseeing trips.

Performance Report

A document or tool that provides information on the performance of an entity, project, or process against expected standards or targets.

Jeep Tours

An outdoor activity business offering guided tours in jeep vehicles, typically in scenic or off-road areas.

Activity Variances

The differences between the planned amounts of costs based on standard cost rates and activities, and the actual incurred costs.