Tony Manufacturing produces a single product that sells for $80. Variable costs

Question

Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $45. The company expects total fixed costs to be $82,000 for the next month at the projected sales level of 2,700 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. Suppose management believes that a $80,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by to justify this additional expenditure? OA. 2,343 units OB. 1,000 units O c. 2,286 units O D. 2,318 units

Explanation / Answer

Calculate sales must increase by to justify this additional expenditure :

Sales must increase = Additional advertising expense/Contribution margin per unit

= 80000/(80-45)

Sales must increase = 2286 Units

So answer is c) 2286 Units

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